Marketing & Advertising Glossary
Essential digital marketing terms, metrics, and concepts explained in plain English.
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Ad Spend
The total amount of money spent on advertising campaigns during a specific period. Includes costs for display ads, search ads, social media ads, and any other paid promotional activities.
Break-Even ROAS
The minimum Return on Ad Spend required for a campaign to be profitable (neither making nor losing money). Calculated as: 1 / Profit Margin. For example, if your profit margin is 25% (0.25), your break-even ROAS is 4.0x.
CPA (Cost Per Acquisition)
The average cost to acquire one customer or conversion. Calculated as:Total Ad Spend ÷ Number of Conversions. Lower CPA is generally better, but must be evaluated alongside customer lifetime value (CLV).
CPC (Cost Per Click)
The amount you pay each time someone clicks on your ad. Common in Google Ads and Facebook Ads. Calculated as: Total Cost ÷ Total Clicks.
CPM (Cost Per Mille / Cost Per Thousand Impressions)
The cost to show your ad 1,000 times. Used primarily for brand awareness campaigns. Formula: (Total Cost ÷ Impressions) × 1000.
CTR (Click-Through Rate)
The percentage of people who click your ad after seeing it. Calculated as:(Clicks ÷ Impressions) × 100. A CTR above 2% is generally good, but varies by industry.
Conversion Rate
The percentage of visitors who complete a desired action (purchase, signup, download). Formula: (Conversions ÷ Total Visitors) × 100.
Dropshipping
A business model where you sell products without holding inventory. When a customer orders, you purchase from a third-party supplier who ships directly to the customer. Requires careful ROAS tracking due to variable supplier costs.
Gross Profit
Revenue minus Cost of Goods Sold (COGS). Does not include operating expenses like ad spend. Formula: Revenue - COGS.
Impression
A single instance of an ad being displayed on a screen, regardless of whether it was clicked. High impressions with low clicks indicate poor ad relevance or creative.
Landing Page
The web page where visitors arrive after clicking your ad. A well-optimized landing page should have a clear headline, compelling copy, and a single call-to-action (CTA). Good landing pages have 20-30% conversion rates.
LTV (Lifetime Value) / CLV (Customer Lifetime Value)
The total revenue a customer generates over their entire relationship with your business. Example: If a customer buys $50/month for 12 months, their LTV is $600. Critical for determining acceptable CPA.
Net Profit
Total profit after deducting ALL expenses including COGS, ad spend, shipping, taxes, and overhead. Formula: Revenue - (COGS + Ad Spend + Other Costs).
Pixel (Facebook Pixel / Meta Pixel)
A piece of tracking code placed on your website that records visitor actions (views, cart adds, purchases). Enables accurate conversion tracking and retargeting campaigns. Required for reliable ROAS measurement.
Profit Margin
The percentage of revenue remaining after COGS. Used to calculate break-even ROAS. Formula: ((Revenue - COGS) ÷ Revenue) × 100. A 30% profit margin means you keep $30 for every $100 in sales.
Retargeting / Remarketing
Showing ads to people who previously visited your website but didn't convert. Retargeting campaigns typically have higher ROAS (5-10x) compared to cold traffic (2-4x) because the audience is already familiar with your brand.
ROAS (Return on Ad Spend)
The primary metric for measuring advertising profitability. Calculated as:Revenue ÷ Ad Spend. A ROAS of 4.0x means you earn $4 for every $1 spent on ads. Must exceed break-even ROAS to be profitable.
ROI (Return on Investment)
Broader profitability metric that includes all costs (not just ad spend). Formula: ((Revenue - Total Costs) ÷ Total Costs) × 100. A 100% ROI means you doubled your money.
Scaling
Increasing ad spend to reach more customers while maintaining or improving profitability. Successful scaling requires maintaining ROAS above break-even. Common mistake: scaling unprofitable campaigns hoping they'll improve (they usually don't).
Target Audience
The specific group of people you want to reach with your ads, defined by demographics (age, gender, location), interests, behaviors, and pain points. Narrow targeting usually improves ROAS but limits scale.
Traffic (Cold vs. Warm vs. Hot)
Cold Traffic: People who've never heard of your brand (lowest conversion rate, highest CPA).
Warm Traffic: People who've interacted with your content but haven't purchased (medium conversion).
Hot Traffic: Past customers or highly engaged prospects (highest conversion, lowest CPA).
UTM Parameters
Tags added to URLs to track campaign performance in Google Analytics. Example: ?utm_source=facebook&utm_campaign=spring_sale. Essential for accurate attribution and ROAS tracking.
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Last updated: February 10, 2026 • Next review: August 10, 2026