CPM vs CPC: Which Model Works Best

A pricing model is essential to any campaign for success in digital advertising. Two common models are Cost Per Mille (CPM) and Cost Per Click (CPC). Knowing the differences between CPM vs CPC allows advertisers to tailor their efforts based on marketing objectives.

What Is CPM?

CPM or Cost Per Mille is a metric that indicates the amount an advertiser pays for one thousand impressions of their advertisement. An impression is counted when an advertisement is shown to a user, regardless of any activity (clicks) from the user. This mode is primarily aimed to improve visibility and brand recognition. For example, an advertiser whose CPM rate is $2 will pay $2 for every 1,000 times the advertisement is shown.

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What is CPC?

CPC or Cost Per Click refers to the model where advertisers pay a certain amount of fee for every user that clicks on their advertisement. This is a performance-based model since it seeks to increase traffic to a known website. It is frequently used in advertising campaigns meant to sell services, products, or targeted leads. For example, if the CPC is set at $0.50, it means the advertiser pays $0.50 for every time the advertisement is clicked.

CPM vs CPC: Key Differences

Payment Structure: CPM pays for views (impressions), whereas CPC pays for views (clicks).
Campaign Goals: Use CPM for building brand awareness while CPC can be used for driving specific actions like website visits or purchases.
Risk and Control: In CPM, advertisers pay regardless of engagement. This could lead to paying for views where users do not interact, otherwise known as unengaged views. CPC on the other hand, allows more control since payment is associated with limited action performed by users.
Cost Efficiency: For campaigns focused on results, cost per click (CPC) is often more economical because the budget is allocated only to users who interact with the ad. Campaigns focused on visibility instead of immediate action usually align better with CPM.

When to Use CPM

Brand Awareness Campaigns: For familiarizing the audience with the brand and maximizing exposure registered by impressions.
High Impression Platforms: usage of platforms where ads have a high chance of being seen by a wide audience.

When to Use CPC

Lead Generation: Focused on directing users to a landing page or collecting user data.
Direct Response Campaigns: Aiming to achieve signing up, downloading, or purchasing the offering.

Conclusion

The decision on whether to use CPM or CPC will depend on what the advertiser hopes to achieve with the campaign. Knowing how each model performs and where it can be applied helps marketers develop effective strategies that make the most of their advertising spend while meeting their business objectives.