How to Calculate Average Revenue Per Ad Display: A Step-by-Step Guide
By Emil Kristensen CMO
@ Sleeknote

As a marketer or website owner, it’s crucial to understand how your advertising campaigns are performing. One useful metric to track is average revenue per ad display (ARPD). This key performance indicator (KPI) measures the amount of revenue generated on average from each time an ad is displayed. In this article, we’ll explore the concept of ARPD, why it’s important, and how to calculate it step-by-step.

Understanding the Concept of Average Revenue per Ad Display

ARPD is a metric that calculates the average revenue earned each time an ad is displayed on a website or other online platform. It’s calculated by dividing the total revenue generated by the number of ad displays. Essentially, ARPD measures the effectiveness of an advertising campaign by evaluating how much revenue it generates per ad impression, regardless of the ad type or pricing structure.

The Importance of Calculating Average Revenue per Ad Display

Tracking ARPD is critical for maintaining the overall profitability of ad campaigns. By knowing how much revenue is being generated per ad display, marketers can identify which ads and advertising platforms are delivering the most value for their investment. Additionally, tracking ARPD provides insight into whether or not the ad campaign is reaching its target audience and engaging users.

Key Components to Consider When Calculating Average Revenue per Ad Display

Before calculating ARPD, there are several key components to consider:

  • Impressions: The number of times an ad is displayed on a website
  • Clicks: The number of times users click on an ad
  • Conversions: The number of times users complete the desired action (such as making a purchase or filling out a form) after clicking on an ad
  • Total Revenue: The total amount of revenue generated from ad displays

A Breakdown of the Formula Used to Calculate Average Revenue per Ad Display

The formula for calculating ARPD is simple:

Total Revenue ÷ Number of Ad Displays = Average Revenue per Ad Display

For example, if a website generated $10,000 in revenue from 100,000 ad displays, the ARPD would be:

$10,000 ÷ 100,000 = $0.10 per ad display

Gathering Data: Tracking Impressions, Clicks, and Conversions

In order to calculate ARPD, you’ll need to gather data on the number of impressions, clicks, and conversions generated by your advertising campaign. This data is typically available through advertising platforms like Google AdWords or Facebook Ads, or through your website’s analytics tools. By tracking these metrics, you can determine which ads and platforms are performing well and adjust your strategy accordingly.

Determining Total Revenue Generated from Ad Displays

The next step in calculating ARPD is to determine the total revenue generated from ad displays. This data can be obtained from your advertising platform or can be manually calculated by multiplying the number of conversions by the average revenue per conversion. For example, if each conversion generates $50 in revenue and there were 100 conversions, the total revenue generated would be $5,000.

Calculating the Average Revenue per Ad Display: Step-by-Step Instructions

Now that you have the necessary data, you can calculate ARPD using the following step-by-step instructions:

  1. Determine the number of ad displays (impressions) generated by your advertising campaign
  2. Determine the number of clicks generated by your advertising campaign
  3. Determine the number of conversions generated by your advertising campaign
  4. Determine the total revenue generated from conversions
  5. Divide total revenue by the number of ad displays to calculate ARPD

Tips for Improving Your Average Revenue per Ad Display

If your ARPD is lower than you’d like, there are several strategies you can use to improve it:

  • Target the right audience: Make sure your ads are being shown to the people most likely to engage with them and complete the desired action
  • Improve ad creative: Experiment with different ad formats, copy, and visuals to determine what resonates best with your audience
  • Optimize landing pages: Ensure that your landing pages are relevant to your ads and make it easy for users to complete the desired action
  • Adjust pricing structures: Experiment with different pricing models (such as cost per click or cost per acquisition) to determine what generates the most revenue per ad display

Analyzing and Interpreting Your Average Revenue per Ad Display Results

As you track your ARPD over time, it’s important to analyze and interpret the results. Look for trends or changes in performance that could be attributed to external factors (such as changes in the industry or new competitors). Additionally, compare ARPD across different advertising platforms or campaigns to identify which are delivering the best results. By monitoring and analyzing ARPD, you can make informed decisions about how to allocate your advertising budget and optimize your campaigns for success.

How to Use Average Revenue per Ad Display to Optimize Your Advertising Strategy

ARPD is a powerful metric that can help you optimize your advertising strategy for maximum profitability. By monitoring ARPD and experimenting with different advertising platforms, pricing models, and ad creative, you can identify the approaches that work best for your business and improve your ROI. Use ARPD as a benchmark to guide your decision-making and continuously refine your advertising strategy for sustained success.

Common Mistakes to Avoid When Calculating or Interpreting Average Revenue per Ad Display

When calculating or interpreting ARPD, there are several common mistakes to avoid:

  • Not tracking all necessary metrics: Make sure you’re tracking impressions, clicks, conversions, and revenue in order to obtain an accurate ARPD calculation
  • Confusing ARPD with other metrics: ARPD measures the average revenue per ad display, which is not the same as metrics like click-through rate (CTR) or cost per click (CPC)
  • Ignoring external factors: Be aware of external factors, such as seasonality or market trends, that could impact your ARPD calculation and interpretation
  • Not drilling deeper into the data: Simply tracking ARPD isn’t enough – it’s important to drill deeper into the data to understand which ads, platforms, and approaches are driving the best results

Conclusion

Calculating ARPD is an essential aspect of any successful advertising campaign. By understanding the concept of average revenue per ad display, gathering the necessary data, and following the step-by-step instructions outlined in this article, you can calculate and analyze ARPD to optimize your advertising strategy for maximum profitability. Remember to track ARPD over time and continuously experiment with different approaches to achieve sustained success.