There are 3 models for determining the cost of placing an advertisement on the Internet: cost per click (CPC), cost per thousand (CPM) and cost per acquisition (CPA). This article discusses in detail what CPC is and what is the peculiarity of this model. However, site owners and advertisers should know and use all three forms as appropriate.
What are CPC, CPA and CPM, what are their differences
CPM, CPC and CPA are the three main ways digital media companies charge advertisers for advertising online.
It is generally accepted that CPC and CPM dominate advertising models. CPC in particular is the leading form for the big internet players. CPM is often preferred for other sites, especially content-driven sites.
CPM (Cost Per Mille) - cost per thousand impressions
The Latin word mille means "thousand". Therefore, CPM is the cost per thousand impressions of an ad when it successfully loads on the web page or app you are viewing. This form of pricing is most commonly seen with ads,which require a large number of impressions, which is usually suitable in situations where banners and advertisements are involved.
Many ad placement platforms prefer the CPM model because they don't risk losing revenue if they don't perform well and they get paid per click. For the largest and most established platforms, this is the standard for pricing, and in terms of overall cost, CPM is almost always the better model.
CPA (Cost Per Action)
In the case of the CPA model, advertisers only pay when a conversion occurs. This means that a marketer who wants to advertise online must create some kind of goal that he interprets as a conversion before starting an advertising campaign based on this model. This purpose may be to register, purchase or even visit the desired section of the website. Whenever a user performs one of these actions, the advertiser pays the agreed bid. Obviously, this model is a priority for most advertisers, but it is not very popular among advertisers.
CPC (Cost Per Click) (also known as PPC - Pay Per Click)
CPC is a cost per click and performance measure. This means that ads are only paid when the user clicks on the ad, regardless of how many impressions are generated before the click is generated.
What is CPC (Cost Per Click), how does it work
CPC is a term that connects advertiser, content distributor and third party intermediaries. This payment method is popular among text ads that appear on search engines. Here you should talk more about this concept and what it is CPC in advertising.
As you might guess, this pricing structure is much more favorable to marketers, but can be difficult to implement. This happens when it is not possible to negotiate with platforms that distribute ads, especially ad networks, which today are willing to work only with the CPM model, even at a low cost per thousand impressions. Advertisers don't like the CPC model because it's hard to plan for the demand for the advertised product and the number of clicks on an ad they've never seen or tested before. Two campaigns with the same CPC may require very different full volume impression levels, and this uncertainty is costly. Only when they have exhausted their ability to sell CPM ads will site owners offer to advertise on them based on CPC. This gives an understanding of what CPC is in contextual advertising.
However, for smaller platforms with little demand, selling their ad space on a CPC basis is often the only option they have. But don't let premium ad placement platforms be misleading becauseCPC campaigns are a huge multi-billion dollar market and there are a lot of people making money from clicks. CPC has a very low risk when buying media ads. Marketers want to pay money for performance, so they have some degree of confidence in their return on investment.
How CPC is calculated
Now, when it became clear what CPC (cost per click) is, we should say a few words about what constitutes the cost of advertising based on this model. CPC is calculated by dividing the estimated profit by the total number of clicks received.
CPC calculation:
CPC=Estimated Profit / Number of Clicks Received
What can be controlled
When placing a CPC campaign, you need to follow these points:
- The maximum CPC an advertiser is willing to pay to get a visitor to their site.
- When and where will the announcement appear.
- What format will the ad appear in (text, banner, video, shopping list, etc.) and its content.
- Which page of the advertiser's site people will be redirected to (landing page).
- The cost of your products or services on the website (the estimated cost depends on the quality and/or service).
- How the site works and interacts with visitors (how the website converts).
What can't be controlled
When placing a CPC campaign, noit will be possible to influence the following parameters:
- Maximum CPC.
- Contest promotional content.
- Competition price for similar goods or services.
- Member website conversion rate.
- The number of times your ad was shown for specific searches or topics (display or keyword traffic).
How to get the most out of the CPC model
Despite the fact that CPC can be easily implemented, problems can occur in the process if one does not know the basic principles. By learning the following useful tips about what CPC is and how to get the most out of advertising based on this model, you can launch an effective campaign that will attract new visitors to the advertiser's website.
Create a goal for the campaign
Many companies and marketing teams choose pay-per-click advertising without having a clear idea of their goals and expectations. This can lead to loss of time, money and serious frustration. To avoid this, you need to make sure that the marketer can answer each of the following questions before starting an advertising campaign.
- Who is the campaign aimed at?
- What result do you want?
- How do you know if your ad campaign is successful?
Answers to these questions will allow you not to "burn" the budget for nothing.
Create an easy-to-use campaign structure
Two words to keep in mind when creating a campaign: relevant and simple. Providing an intuitive and manageable campaign structure will improve campaign effectiveness and allow the advertiser to better identify positive or negative results.
Disable default settings
With a variety of preset options, setting up an ad campaign can seem like a simple three-step process: create an ad, choose a target, and set a budget. However, this can result in the ad campaign not being effective and some tweaking is required to get the most bang for your buck. A deeper understanding of the target audience gained through shopper personalization scores and website analytics can help the marketer navigate these dimensions.
Understanding success factors
No matter how big the business is, if an advertiser is going to include CPC ads in their marketing strategy, they need to understand what factors influence the success of a campaign. This will help you set appropriate goals and expectations, and make adjustments that will actually lead to success.
