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CPM, CPC or CPA?

That’s an interesting question for the experienced online marketers and a rather confusing one for the Internet novices who want to make an incursion into the world of online advertising.

But let’s give up acronyms and baffling jargon and let’s see what is all about. Advertising on the Internet can be purchased in various systems, the most common being CPM (Cost Per Mille), CPC (Cost Per Click) and CPA (Cost Per Action).

CPM alias Cost Per Mille alias Cost Per Thousand impressions

Represents how much it will cost for an ad to be shown a thousand times. For example, a website could sell banner ads for $50 CPM. CPM is used not only in online advertising, but also in television, radio and in print.

The CPM system favours only the publishers because they’ll receive revenue regardless of the campaign’s success. Also, a thousand impressions doesn’t guarantee that the ad will be actually seen 1000 times; the system only guarantees that it will be displayed 1000 times for a certain amount of money. The system’s most important advantage for advertisers is the fact that they can easily compare media prices.

These facts made many of the advertisers move towards CPC and CPA.

CPC alias Cost Per Click

Is the amount of money (cost) paid per click-through. In other words, the system implies that the advertiser will pay a certain sum of money only when its advertisement gets clicked and brings one visitor to its site. The CPC system is widely spread today because it divides the risks and responsibilities equally between the publisher and the advertiser. That means the advertiser has to make sure the ad is relevant to the website’s content and therefore a click has a good chance of turning into an action (we’ll see in a minute what an action means). The publisher in return, has to display the ad in such a way that it is visible for its visitors. After all, the publisher will receive revenue only if the ads it sells get clicked through.

CPA alias Cost Per Action alias Cost Per Acquisition

Is the price an advertiser pays for a specified action linked to the advertisement. That action can be a purchase (thus the name Cost Per Acquisition), a form filling, an account registration, a request of information, a download and so on. The CPA system favours the advertisers (only) because they get to pay only if that ad was seen, clicked through and the user has performed the intended action. The downshift with this method is that it disadvantages the publisher who can only hope the advertiser’s advertisement and offer is compelling enough.

Conclusion

So the question is still valid: CPM, CPC or CPA? The answer, predictably, is – it depends. Firstly it depends on the advertisers’ goals and budget. For instance, if the advertiser wants brand awareness along with clicks and has a strong budget, CPM is the right system. On the other hand, if the advertiser wants results with the least money possible, it may opt for a CPC or a CPA system.

Secondly, it depends on the advertising market. Par example, a publisher can set a Cost Per Mille impressions so low that will attract the advertisers that wouldn’t otherwise buy ads in this system. On the other hand, the attractiveness of the CPA comes with… a cost. Very often the Cost Per Action can be very high, leading the advertiser towards CPC system or such.

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3 Responses to “CPM, CPC or CPA?”

  1. Serren Says:

    Every time i come here I am not dissapointed, nice post

  2. Isabel mendoza Says:

    How can i earn from this cost per click system.. I have a website and we sell nutritional supplement on our site…pls guide and enlighten me…thanks

  3. Daniel Rith Says:

    Your post is verry useful, but in my opinion , programs CPM is only for site s with big traffic,because you have 10k visitors a month , you don’t earn much money,and depend where is the traffic.But programs CPA is for site s with small traffic.Keep going with your work . Bye…

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