Chapter 3: Common Terms and Abbreviations — Plain English Explanations

1. Traffic Metrics: How many people saw it?

• Impression:
  • Plain English: How many times the ad was displayed.
  • Scenario: You hand out flyers. Even if someone just glances and puts it in their pocket, that’s 1 Impression.
• Reach:
  • Plain English: The de-duplicated number of people who saw your ad.
  • Scenario: If you give 3 flyers to the same person, Impression is 3, but Reach is 1.
• CTR (Click-Through Rate):
  • Plain English: Clicks ÷ Impressions.
  • Subtext: If CTR is high, your “flyer” is attractive. If low, either your creative is boring or you’re giving flyers to the wrong people (e.g., selling steak to vegetarians).
• CPC (Cost Per Click):
  • Plain English: The average amount you pay to get one person to visit your site.

2. Conversion Metrics: Did they actually buy?

• Conversion:
  • Plain English: The action you want the user to take (e.g., Purchase, Sign up, Download).
• CVR (Conversion Rate):
  • Plain English: Buyers ÷ Visitors.
  • Subtext: If CTR is high but CVR is low, your ad is good at “tricking” people in, but your store/landing page is bad at closing the deal.
• CPA (Cost Per Action):
  • Plain English: How much you paid in ads to get one actual customer.
  • Scenario: You spent $1000 and got 10 sales. CPA is $100. If your product costs $50, you are losing money.
• ROAS (Return on Ad Spend):
  • Plain English: Revenue ÷ Ad Spend.
  • Scenario: You spent $1k and made $5k in sales. ROAS is 5.

3. Audience & Tech: Who and How?

• Targeting:
  • Scenario: A yoga studio setting ads to “Females, 25-45, living within 5 miles, interested in meditation.”
• Lookalike (LAL):
  • Scenario: You give Facebook a list of your 1000 best customers and say, “Find me 1 million people whose underlying behaviors are most similar to these guys.”
• Pixel:
  • Scenario: A user looks at red sneakers but doesn’t buy. Because you have a Pixel installed, Facebook sees this. The next day, that user sees those same sneakers in their feed. This is Retargeting.
• Attribution:
  • Scenario: A user sees an ad on Monday, clicks a Google link on Wednesday, and buys on Friday. Who gets the credit? Attribution models decide this.

4. The “Causal Chain” of Metrics

Example: Selling a $1000 Air Purifier.

1. Impression: 100,000 times.
2. CTR: 1% (1,000 visitors).
3. CPC: $1 (You spent $1,000).
4. CVR: 2% (20 orders).
5. CPA: $50 (Cost per customer).
6. Revenue: $20,000.
7. ROAS: 20,000 / 1,000 = 20.

5. Brand in Action: Booking.com’s “Conversion Magic”

Background: Booking.com’s tech team’s core mission isn’t “fixing bugs,” but ruthless A/B testing to increase CVR.

Terminology in Practice: Everything you see on Booking.com is “tuned” by CVR metrics:

1. Scarcity: “Only 1 room left!” or “5 people booked this in the last hour.” The goal: Increase CVR by creating urgency before your CPC is wasted.
2. Social Proof: Prominent review scores to lower purchase anxiety.
3. Retargeting: If you search and leave, Booking uses its Pixel to show you that exact hotel on Facebook.

Insight: For a company of this scale, a 0.1% increase in CVR translates to hundreds of millions in additional revenue.

Next Chapter: Chapter 4: Reading Metrics, Not Calculating Them. We will discuss why high CTR can be bad and the 5 metrics beginners often focus on by mistake.