Which one yields the best results for publishers? Find out the answer in this CPC vs CPM comparison article.
When it comes to buying online ads for your business, the most popular pricing models are CPM and CPC. We hear the question, “Which one should I use?” a lot. Before answering that, let’s define what each of these cost models means. If you’re looking for what differentiates the two pricing models, you’ve come to the right place.
What’s The Definition of CPC and CPM?
CPC stands for “Cost Per Click.” In this model, you pay a set amount every time your ad is clicked. For example, if you were paying $0.40 per click, and your ad is clicked 1,500 times, you would pay the ad network $600 total for your ad. If fewer people click your ad, you would pay less.
CPM stands for “Cost Per Mille”. “Mille” refers to every 1,000 impressions. With this model, you pay a set amount for a network to serve up your ad 1,000 times. This price point is unaffected by whether people click through to your website or not.
What’s the Difference between CPC and CPM?
- CPC (Cost Per Click): you pay when someone clicks on your ad.
- CPM (Cost Per Thousand Impressions): you pay based on how many people see your ads.
The CPM model is totally different from CPC as your bidding is focused and charged on the number of impressions your advert receives rather than the number of clicks. CPM bidding is charged per thousand impressions your ad receives. Make sure to check out the latest from Honchō’s industry-leading Paid Media team for more great insights.
CPC vs. CPM: [Quick Comparison]
Cost Per Click (CPC) Bidding
CPC bidding is where you only pay if someone clicks on one of your ads. In most cases, people will generally use CPC bidding as it is designed for the Search Network. It’s also the recommended bidding strategy when trying to drive traffic to your website, and you know how much you are willing to pay. Within CPC bidding, there are two separate bidding options available:
When you set a daily budget, Google Ads will attempt to bring you as many clicks as they can for your set budget. You can also set a maximum cost per click to make sure Google doesn’t spend more than you would. If you use automatic bidding, I would highly recommend setting a maximum budget for CPC ads!
You only pay when someone clicks on your advert, but this option allows you to control your maximum bids. You can set bids at the Ad Group level, keyword level, or placement level. I personally like this option as I feel it gives you more control over what you spend per click.
Cost Per Thousand Impressions (CPM) Bidding
CPM bidding is the most common option for advertisers who are targeting the Display Network, as this is the best option if you are trying to increase or improve your brand awareness.
One of the downsides of CPM ads is that you could potentially pay for a thousand impressions but receive no clicks to your website.
On the other hand, a benefit of CPM ads is that the display network is solely judged on price, so if it has the highest bid, it will rank at number 1, whereas CPC bids are judged on CTR, Quality Score, and other relevance factors.
Also Read: Top 12 CPC/PPC Ad Networks (2022 Update)
Which Is Best For Ad Publisher’s Goals?
Which model is right for you depends on your advertising campaign’s goals. CPC is a good option if your business is an online marketplace or sells products dependent on people clicking through and browsing your website.
If what you’re selling is inexpensive or something people could conceivably want to buy on impulse, then CPC could enable you to only pay for those ads that bring direct traffic to your site.
However, if the product you’re selling is $30,000 or above, direct traffic may not be as important as having a general awareness of your business among people who would be most interested.
With CPM, you’re guaranteed a certain number of ads will be shown to your audience since you’re praying specifically for the number of impressions.
To make the right choice for your business, you should consider the following considerations:
Campaign Objective: If you want to raise brand awareness, CPM provides you with the option to reach a broad audience. If your business prioritizes sales and ROI from ads, you should prefer CPC.
Cost of Product: If what you’re selling is inexpensive, then CPC enable you to only pay for those ads that bring direct traffic to your site. CPM, however, raises awareness of your company so that when someone needs to make a major purchase, they consider buying from you.
Website Quality: Your business’s website should be well-designed so that customers can easily search for products, services, and information.
To summarise, both bidding strategies are different, but both have their own benefits and drawbacks. They can be used for different campaign goals, such as driving traffic to your site, driving brand awareness, or getting sales for your retail business.
Something to bear in mind with each pricing model for online ads is that CPC bidding is mainly used for Search Network campaigns, and CPM bidding is primarily used for Display Network campaigns.
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FAQ Related to CPC vs CPM
When you want to calculate CPM, you’ll work on the cost per 1,000 impressions basis. Here, you’ll simply charge advertisers a flat fee for every 1,000 times their ad is shown.
For example, let’s say you charge an advertiser $5 per 1,000 impressions. Regardless of how many clicks the ad gets, with 10,000 impressions, the advertiser will pay you $50.
When you use CPC, an advertiser will pay you every time someone clicks on their ad (which is displayed on your site). This model differs from CPM in that the advertiser will set a budget and the maximum amount that they’re willing to pay for a click. This is their bid.
An ad network like Google Adsense then compares their bid to the bids of other advertisers, and if their bid is competitive, the ad network will show their ad until their complete budget is used up.
Ad exchanges allow billions of impressions to be bought and sold in real-time using an auction process. As such, the buying and selling process is based on bidding.
Publishers can set the prices they’ll accept for each impression. They can also set the criteria for the types of impressions that they want to buy and sell.
Advertisers then bid on these impressions and compete with one another for every impression. As a result, the auction drives up the price of the ad space.