There are 3 models for determining the cost of placing an advertisement on the Internet: cost per click (CPC), cost per thousand (CPM) and acquisition cost (CPA). This article details what CPC is and what makes this model special. However, site owners and advertisers should know and use all three forms, depending on the situation.
What are CPC, CPA and CPM, what are their differences
CPM, CPC, and CPA are the three main ways digital media companies charge their advertisers for advertising on the Internet.
It is generally accepted that CPC and CPM dominate advertising models. CPC, in particular, is the leading form for major online players. CPM is often preferable to other sites, especially content-oriented ones.
- CPM (Cost Per Mille) - cost per thousand impressions.
The Latin word mille means "thousand." Consequently, CPM is the cost of one thousand impressions of an ad when it successfully loads on the webpage you are viewing or in the application. This form of pricing is most common for ads that involve a large number of impressions, which is usually suitable in situations when it comes to banners and advertisements.
Many platforms that provide advertising platforms prefer the CPM model, because in this case they do not risk losing profits in case of ineffective advertising and receive payment for each response. For large and most well-known platforms, this is the pricing standard, and in terms of overall cost, CPM is almost always a more profitable model.
- CPA (Cost Per Action) - cost per action (or cost of acquisition)
In the case of the CPA model, advertisers pay only when a conversion occurs. This means that a marketer who wants to advertise on the Internet must create some goal, which he interprets as a conversion, before starting an advertising campaign based on this model. This goal may be to register, purchase, or even visit the desired section of the website. Whenever a user performs one of these actions, the advertiser pays the agreed bid. Obviously, this model is a priority for most advertisers, but it is not very popular among advertisers.
- CPC (Cost Per Click) - cost per click (also known as PPC - Pay Per Click)
CPC is cost per click and a measure of performance. This means that advertising is paid only when the user clicks on the ad, regardless of how many impressions will be delivered before the click is made.
What is CPC (Cost Per Click), how does it work
CPC is a term that links advertisers, content distributors, and third-party resellers. This payment method is popular among text ads that appear on search engines. Here we should talk in more detail about this concept and what CPC is in advertising.
As you might guess, this pricing structure is much more favorable for marketers, but can be difficult to implement. This happens if it is impossible to agree with platforms that distribute advertising, especially with ad networks that today are ready to work only with the CPM model even at low cost per thousand impressions. Advertising distributors do not like the CPC model, because it is difficult to plan the demand for the advertised product and the number of clicks on an ad that they have never seen or tested before. Two campaigns with the same CPC may require completely different levels of impressions in full, and this uncertainty is expensive. Only having exhausted the ability to sell ads with the CPM model, site owners will offer to place ads based on CPC. This gives an understanding of what CPC is in contextual advertising.
However, for small platforms that do not have much demand, selling their ad space based on CPC is often the only option they have. But do not let premium advertising platforms be misleading, because campaigns based on the CPC model are a huge multi-billion dollar market, and there are many people who earn on the basis of clicks. CPC has a very low risk when buying media ads. Marketers want to pay money for productivity, so they have a certain degree of confidence in the return on their investment.
How is CPC calculated?
Now that it has become clear what CPC (cost per click) is, a few words should be said about what the cost of advertising is based on this model. CPC is calculated by dividing the estimated profit by the total number of clicks received.
CPC calculation:
CPC = Estimated Earnings / Clicks Received
What can be controlled
When placing a CPC campaign, you need to monitor the following points:
- The maximum cost-per-click that an advertiser is willing to pay to receive a visitor on his site.
- When and where will the ad appear.
- In what format will the ad be displayed (text, banner, video, shopping list, etc.) and its content.
- Which page of the advertiser's site will be redirected to (landing page).
- The cost of your products or services on the website (the estimated cost depends on the quality and / or service).
- How the site works and interacts with visitors (how the website is converted).
What is impossible to control
When placing a CPC campaign, you will not be able to influence the following parameters:
- Maximum cost per click.
- Contest advertising content.
- Competition price for similar goods or services.
- Member site conversion rate.
- The number of times your ad shows for specific searches or topics (display or keyword traffic).
How to get the most out of the CPC model
Although CPC can be easily implemented, problems can occur in the process if you do not know the basic principles. Having studied the following useful tips on what CPC is and how to get the most out of your ad placement based on this model, you can launch an effective campaign that will attract new visitors to the advertiser's website.
- Create a goal for the campaign.
Many companies and marketing teams choose pay-per-click advertising without a clear idea of their goals and expectations. This can lead to loss of time, money and serious disappointment. To avoid this, you need to make sure that the marketer can answer each of the following questions before the start of the advertising campaign.
- Who is the campaign targeted at?
- What result should be obtained?
- How do you know if an ad campaign is successful?
Answers to these questions will help not to “burn” the budget for nothing.
- Create an easy-to-use campaign structure.
Two words to keep in mind when creating a campaign are: relevant and simple. Providing an intuitive and manageable campaign structure will make it possible to increase its effectiveness and allow the advertiser to better identify positive results or their absence.
- Disable default settings.
Thanks to various predefined parameters, organizing an advertising campaign may seem like an easy three-step process: create an ad, choose a goal and set a budget. However, this can lead to the fact that the advertising campaign will not be effective and in order to get the most out of the money spent, a certain setting will be required. A deeper understanding of the target audience obtained through evaluating customer personalization and website analytics can help the marketer navigate these parameters.
- Understanding success factors.
No matter how large a business is, if an advertiser is about to incorporate CPC-based advertising into his marketing strategy, he must understand the factors that influence the success of a campaign. This will help set appropriate goals and expectations, as well as make adjustments that will truly lead to success.