CPM: Cost Per Mille
CPM is an acronym for cost per mille, meaning the cost per 1000 impressions (or how many times it is seen). This refers to how much it costs to have an ad published a thousand times on a website and is seen by users.
The total cost paid in a cpm deal is calculated by multiplying the Total Impressions by the CPM rate & then dividing it by 1000. For example, one million impressions at cpm equal ,000 in gross revenue.
To learn more, check out our ultimate guide to CPM.
CPC: Cost Per Click
CPC means Cost Per Click, and it’s a method that websites can use to determine the average times an advertiser has clicked on the relevant ad. CPC is also a widely used metric that advertisers incorporate to manage campaign budgets & performance.
So let’s say your ad gets 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 payment scheme like CPM and CPC; however, it differs in that 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, therefore, CPA is Cost Per Acquisition. 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 come into play for PPC campaigns, an advertiser will usually pick one over the other. If an advertiser has 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 need to optimize for a quality PPC profile score or have a strict daily budget, opt for CPC.
CTR: Click-Through Rate
So while cpm, CPC & CPA 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. The percentage is found when we divide the number of users who clicked on the ad by the number of times the ad was delivered.
CTR vs CPA
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.
CPC vs CTR
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.
So to recap…
CPM or Cost Per Mille measures is the cost of every 1000th ad impression made
CPC or Cost Per Click measures the average cost every time a user clicks on an advertisement.
CPA or Cost Per Acquisition is the cost every time a conversion is made
And finally, CTR or click-through rate measures the efficiency of clicks actually going through to the ads website.
Do you still have questions and want to see how you can further increase your ad revenue? Contact our team today.