The algebra of advertising provides a blueprint for your Facebook and social advertising. By learning these formulas you will be able to solve your performance marketing challenges quickly and save a lot of money in the process!

1. The Algebra of Advertising
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2. Performance Marketing contains unique jargon
and formulas.
Delivering peak performance comes from a
deep understanding of how these interact.
Our goal today is to provide a crash course in
the algebra of advertising.
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3. How Does Facebook Show Ads?
The ad with the highest eCPM is shown. Think of eCPM as Facebook’s way quantifying value to the
person seeing the ad.
What an advertiser is willing to pay is only one of the four factors in Facebook’s decision to show an
ad.
Let’s break down the other factors.
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4. How to think of CTR?
The average person scrolls through one Statue of Liberty ( 300 feet ) of News Feed every day!
Click Thru Rate is a measure of the Thumb-Stopping power of an ad.
For most cases, 2% CTR is a goal and above average CTR.
But what does that look like?
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5. Here is an image of
1,000 people
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6. This is a 0.5% CTR
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7. This is a 2% CTR
Being at or above this is a common goal.
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8. How To Think of CVR?
CVR or Conversion Rate, can be thought as
how well did the creative communicate what
was occurring after the click.
CTR & CVR tend to seesaw.
Things that increase CTR can decrease CVR
and vice versa.
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9. How Does Facebook Show Ads?
CTR & CVR can be combined into a metric called Action Rate. This is a balanced metric.
It measures the Thumb Stopping power of the ad along with how well it communicates.
The higher this is, the more aligned the advertising is with the audience.
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10. How Does Facebook Show Ads?
We can now break down the components of Facebook’s decision making.
Facebook will penalize or subsidize your ad by its Action Rate. It is also a rare instance that
Action Rate doesn’t move in lock step with other social metrics.
Note that the Bid and the Action Rate are more important than social metrics due to the
multiplication!
Express in dollars how important it
is to show this ad in feed.
Is your ad interesting to your audience and
honest about its offering?
Are people taking other positive, e.g.
comments/likes, or negative, e.g. x out, actions?
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11. This is how Facebook decides to show an ad.
The key is how to balance Facebook’s rules with what is
important to your business.
In most cases this is decreasing CPA in key audiences.
This is done by monitoring 2 key metrics…Let’s investigate.
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12. First Key Metric - CPM
CPM is the price to show your ad 1,000 times
on a given platform.
Ads can be shown more than once per
person.
CPMs are typically in the $10 - $15 range on
Facebook/Instagram. Frequencies are
typically around 1.5 - 2 in a given month for a
large audience.
Note that CPM is not Facebook’s eCPM.
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13. APM - The Other Key Metric
We saw Action Rate before. We are going to multiply that by 1,000 to produce a new metric Action Per
Thousand Impressions or APM.
This has the same properties as Action Rate with one HUGE BENEFIT.
But first, a detour in ratios….
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14. Understanding Ratios
Before we introduce any jargon, let’s first examine a simple ratio and 2 key consequences
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15. Understanding Ratios Cont.
This next principle is the trickiest.
It is principle of relative change between B and C.
A will increase or decrease depending on the relation between B and C.
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16. The Formula
Most businesses want to decrease their CPA.
Scaling Action Rate by 1,000 allows APM to shine and deliver this HUGE benefit.
In one short formula we now have explicit rules to explore
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17. An Example
Let’s assume the following information
● Total Spend = $5,000
● CPM = $12.50
● CTR = 1.5%
● CVR = 3.0%
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18. An Example Cont.
Let’s assume the following information
● Total Spend = $5,000
● CPM = $12.50
● CTR = 1.5%
● CVR = 3.0%
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19. An Example Cont.
Let’s assume the following information
● Total Spend = $5,000
● CPM = $12.50
● CTR = 1.5%
● CVR = 3.0%
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20. The Algebra of Advertising
We now know explicit steps of actions to take to improve advertising in feed!
● Increasing APM means Facebook will subsidize the ad and allow the advertiser to pay
less
● Increasing APM is done by increasing CTR or CVR or both as APM is built from CTR &
CVR.
● Increasing CTR means more Thumb-Stopping Content
● Increasing CVR means ads must communicate honestly
● Increasing CTR & CVR means establishing optimal audiences and approach
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21. Thank You
info@dysrupt.com
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