CPM vs CPC in digital marketing

Running a digital marketing campaign means that you need to make decisions.

Not only do you have to decide on what kind of website you want, how you are going to get leads that might turn into conversions but you also need to think about the type of advertising you are going to use.

If you are fairly new to digital marketing and online advertising you might be confused by terms such as CPC, CPM and CPA amongst others.

In this blog, we are going to have a look at something called CPC and CPM in online ads. By the end, you will have a much better understanding of:

● What CPC is
● What CPM is
● What one you should use for your campaign

Let’s get straight to it.

what is cpm in digital marketing

What is CPC?

You may have come across this term before.

CPC stands for cost per click.

The best way to explain it is to look at an example. Compared to other forms of paying for online ads such as how many times it is viewed (as we will see below), with CPC you pay when someone clicks on your ad.

So if you have your ad optimized and displayed in Google or on a website. Instead of paying when it shows up, you pay out when someone clicks on it. How much it costs is determined by several factors which include:

● Your maximum bid
● Your Quality Score,
● Ad rank of other advertisers bidding for the same keyword

While cost per click can be a very good form of advertising to use, if not set up correctly it can really eat into your ROI. You aren’t paying when someone turns into a sale so if people are clicking your ads but not making purchases or performing whatever action you want them to, it might not turn out to be very profitable.

What is CPM?

Now that you know what CPC is, we need to tell you about CPM which stands for cost per mille or rather cost per 1000 impressions. You’re probably wondering what is cpm in digital marketing?

Rather than paying when someone clicks on your ad, or pay per impression with CPM you pay out when it has been viewed 1000 times. This has several advantages.

For one, it can be cheaper and usually is than CPC and the cost is easier to work out as it is solely based on the price as opposed to the CPC criteria above. There are many CPM ad networks out there.

What about CPA?

Before we get onto if you should use either CPC or CPM, we need to have a quick look at something called CPA advertising or cost per action.

This is one of the most common forms of paying for online ads. Rather than paying for every 1000 impressions or when someone clicks on your ad, with CPA you only pay out when someone performs an action.

This could be:

● Buys a product
● Signs up to a service
● Interacts with your website in some way

The point is that before you pay out under this model, you need the person to perform an action. For some campaigns, this can be very profitable as you won’t pay for your ad until you make a sale for example however it is often very competitive and difficult to get noticed if you have a small budget.

Which one is best?

So, CPC v CPM – what is better for your campaign?

They both have advantages and disadvantages and it will depend on what type of campaign you are running.

CPM marketing is great if you want to drive awareness of your brand and increase your visibility. It can be a cheaper way to get your ads noticed and websites will have a bit of an incentive to show your ads as it takes 1000 impressions to get a pay out.

If you want conversions then CPC is the better of the two, especially when it comes to retargeting ads. You might not get a single click with CPM but you’ll still need to pay out after 1000 impressions whereas with CPC is more tailored and while it might not get seen as much as a CPM ad, it should be targeted towards people who are likely to click on the link.