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Marketing

Marketing

Learn marketing, share your advice, ask questions, and more! Newbies and pros welcome.

405 members
Posted byanonymous_fxlICrhOSYin/marketing-Feb 25, 2016 at 12:03 AMΔ

What's the difference between CPM and CPC advertising?

  • Advertising

Is one better or worse? How do I compare prices across platforms to know what I should be doing?

One comment
  • KaelaFeb 25, 2016 at 12:20 AMΔ

    First, some basic definitions:

    • CPM: Cost per 1,000 impressions (when an ad is loaded onto a page someone is looking at), regardless of if they click on it or not
    • CPC: Cost per click, regardless of how many times the ad is shown

    So that's the basic difference. Now which is better? That's a much more tangled and in-depth question, and there's not a good one. It depends a lot on you as a company, how good your ads are, and how good you target those ads.

    Base comparisons

    Let's say you have an ad that gets about a 5% CTR (click-through rate, or in other words, 5 out of every 100 peopel who see your ad click on it), and you have $50 to spend on advertising.

    Now let's say that you have the opportunity to buy an ad at a $5 CPM. Spending $50 gets you 10,000 impressions (1,000 for every $5). Assuming your 5% CTR holds true, that means 500 people will click on your ad.

    You could also buy an ad at a $5 CPC. This means you pay $5 every time someone clicks on your ad, and since your limit is $50, you run out of money after 10 people click on your ad.

    So, obviously, the $5 CPM is better in this case.

    But unfortunately it's not anywhere near that simple. The prices aren't that direct to compare, you usually don't know what your CTR is until you start running them, and often the types of ads you would be running are completely different so the CTRs won't even be the same. And more importantly, CTRs do not equal conversions, which is what you should ACTUALLY be caring about.

    So really, it varies so much that there's no way to say definitively which is better*.

    How to actually figure it out for your own company

    The best way to find out is to run a few small tests with a small amount of your budget, testing a few different ad visuals and messaging and a few different ad platforms. Keep track of how much you spend, how many views and clicks each gets (you should be able to get this from wherever you are buying the ads from), and how well those people convert once they get on to your site (make sure you use tracking codes or something on your end so you can do this!!). Once you know how many people converted for an ad (bought something, signed up, whatever you were trying to get them to do), you can divide that by how much you spent on the ad to get your cost per conversion. THIS is the number that will let you decide where to devote the rest of your advertising budget.

    *In general though, I do tend to personally think CPC is better, as you only get exactly what you're paying for. Otherwise you could end up blowing $10,000 on ads that are so buried on a page that no one actually really sees them even though they're counted as an impression, and even fewer people click on them, and end up with zero results to show.

Marketing

Marketing

Learn marketing, share your advice, ask questions, and more! Newbies and pros welcome.

405 members
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