What Are CPM, CPC, CPA, CTR?

Publift
March 18, 2021

CPM: Cost Per Mille

CPM stands for cost per mille. It stands for "cost per 1000 impressions". In simple words, CPM refers to how much it costs to have an ad published a thousand times on a website and is seen by users. The "mille, in CPM" is the Latin word for "thousands."

The total cost paid in a cpm deal is calculated by multiplying the Total Impressions by the CPM rate & then dividing it by 1000.

CPM Formula

CPM = (Total Campaign Spend / Number of Impressions) * 1,000

For example, If a website publisher charges $4.00 CPM, that means an advertiser must pay $4.00 for every 1,000 impressions of its CPM ads.

To learn more about this ad network, check out our ultimate guide to CPM.

CPC: Cost Per Click

CPC stands for Cost Per Click. It’s a method that websites use to determine the average times an advertiser has clicked on the relevant ad. CPC is also a widely used google adwords metric that advertisers incorporate to manage their campaign budgets & performance.

CPC Formula

CPC = Total Cost / Number of Clicks

So let’s say your cpc ads get 2 clicks, one costing $0.40 and the other is $0.20, this totals $0.60.

You’d divide your $0.60 by 2 (your total number of clicks) to get an average CPC of $0.30.

CPA: Cost Per Acquisition

CPA is also a pricing model like CPM and CPC; however, in this method advertisers only pay when the user completes the desired transaction, such as a purchase, download or free trial. Therefore, the advertiser only pays when an acquisition is made, which means Cost Per Acquisition.

CPA Formula

CPA = Cost to the Advertiser  / Number of Conversions

However, this means that the publisher takes all the risk for running the ad as you will be paid based on conversions made instead of just clicks or impressions. This is often referred to as affiliate advertising & was a widely used model in the mid-2000s.

Is CPA better than CPC?

Rather than focusing on the click, whether the user converts after clicking on an ad becomes most important. While both CPA and CPC campaigns come into play for PPC campaigns, an advertiser will usually pick one over the other based on the requirement.

If advertisers have a great click through rate and consistent conversion history, they probably should go with CPA (which pays more per click but could earn more revenue). However, if an advertiser has not established a steady stream of conversions, still needs to optimize for a quality PPC profile score or have a strict daily budget, opt for CPC.

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CTR: Click-Through Rate

So while CPC, CPA and CPM all indicate the cost of advertising online, CTR measures the efficiency. The CTR or Click Through Rate, is measuring the success of online ads by accumulating the percentage of people that actually click on the ad to arrive at the hyperlinked website.

CTR is calculated by dividing the number of users who clicked on the ad by the number of times the ad was delivered.

CTR Formula

CTR = Total Measured Clicks / Total Measured Ad Impressions x 100

For example, if an ad has been clicked 200 times after serving 50,000 times, by multiplying that result by 100 you get a click-through rate of 0.4%

CPI: Cost Per Install

CPI stands for Cost Per Install. CPI campaigns are specific to mobile applications. In this campaign, ad exchange publishers place digital ads across a range of media to get the maximum number of the advertised applications installed. The advertiser is charged the bid or fixed rate only when the application is installed.

CPI Formula

CPI = Total Ad Spend / Number of Installs

For Example, a $10,000 ad produces 6,500 installs for a $1.54 CPI

CPL: Cost Per Lead

CPL refers to Cost Per Lead. These costs are associated with any advertising campaigns that are being run to obtain leads and get the users converted.

To calculate CPL, advertisers can simply divide their total advertising cost for a given campaign or ad group by the number of leads generated by that campaign or ad group.

CPL Formula

CPL= Total Ad Spend / Total New Leads 

For example, let’s say you spent $500 on an advertising campaign and obtained 20 leads. With these numbers, your CPL is $25. You spend $25 for each lead you converted.

CPV: Cost Per View

CPV stands for Cost per view. It is a pricing model where video advertisements are charged based on the number of views or interactions an ad receives. A view here is counted when a viewer watches 30 seconds of the advertised video ad or engages with the ad, whichever comes first.

Video interactions involve clicks on the call-to-action overlays (CTAs), banners or cards. Advertisers can even set CPV bids to tell Google the maximum amount they're willing to pay for each view.

CPV Formula

CPV = Total Ad Spend / Total Number of Views

For example, if total cost of advertisement is $3,000 and their total number of views is 10,000, then the CPV is 3,000/10,000=.03.

With CPV advertising, eCommerce merchants can connect with their relevant audience, making this advertising method worthwhile for brands looking to expand their brand awareness via videos.

CTR vs CPA

CTR is the number of clicks divided by the number of impressions, and is expressed as a percentage whereas CPA is the amount that an advertiser has paid to reach its objective such as brand awareness, leads, sales, downloads, etc. 

Amongst the advertising metrics, it’s worth considering an alternative for CTR as CPA. Instead of focusing on clicks to measure success, the focus shifts to the number of new leads or customers (i.e. actual conversions).

To analyze how ad spend affects your bottom line, CPA may be a more useful metric to monitor campaign performance compared to CTR.

When advertisers compare CPA for campaigns, they are looking to drive brand awareness, leads, sales.

CPC vs CTR

CTR is the number of times an ad is clicked compared to the total numbers of visitors viewing the ad, whereas CPC only refers to the actual price paid for each click.

CPC helps advertisers in analyzing the ROI (Return on Investment), understand if they are paying under or over for the intended action and assist them in knowing how much they should pay for the clicks on a particular campaign. It is vital to also consider CPC by taking into account both the cost and value of the advertisement

CTR gives a detailed look and deeper knowledge about the effectiveness of the ad campaign. It helps in

  • Evaluating the call to action ad copy
  • Analyzing the potential conversion
  • Determining the success in comparison with competitors as well as between the campaigns
  • Enhancing Quality Score which eventually enhances CPC and boosts ROI

You can think about the inverse relationship between CPC and CTR like this: a successful ad campaign aims for a high CTR and low CPC. Why? To help gain more conversions while saving money.

‍CPM vs CPC

The CPM model is totally different from CPC. Bidding in CPC is focused and charged on the number of impressions your ad receives rather than the number of clicks. On the other side, CPM bidding is charged per thousand impressions your ad receives.

CPC is basically used to drive conversions, whether these are lead generation or websites whereas CPM is used for driving brand engagement and awareness.

CPC bidding is primarily used for Search Network campaigns whereas CPM bidding is majorly used for Display Network campaigns.

Hence, both bidding strategies are entirely different but both have their own benefits and drawbacks. Advertisers can use them for different campaign goals such as brand awareness, or driving traffic.

CPC vs CPA

CPA is directly related to your campaign success. Once your campaign has started performing and you have sufficient campaign data to calculate your CPA, the best practice is to compare that to your customer's lifelong value estimates and make sure your ad campaigns are driving business profits effectively. If your CPA is too high, your campaign will lose money even if you generate a lot of conversions.

On the other side, clicks are user interactions that can turn into conversions. Therefore, tracking your CPC can assist you in evaluating whether you're generating enough ad traffic at a low enough cost to ensure a profitable PPC advertising campaign.

All in all, the CPA quantifies the cost of goal conversions in a PPC campaign, while the  CPC metric quantifies the average cost of ad clicks.

Conclusion

So to recap…

CPM or Cost Per Mille measures is the cost incurred by the advertiser for every 1,000 ad impressions

CPC or Cost Per Click measures the average cost incurred by the advertiser every time a user clicks on an advertisement.

CPA or Cost Per Acquisition is the cost every time a conversion happens for the advertiser

CPI or Cost Per Install is the cost incurred by the advertiser every time an advertised application is installed

CPL or Cost Per Lead measures the cost incurred by the advertiser to earn a lead

CPV or Cost Per View measures the cost incurred by the advertiser every time a video is viewed for at least 30 secs or when the user engages with it.

And finally, CTR or click-through rate measures the efficiency of clicks actually going through to the ads website.

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