CPM vs CPC – which payment options offered by online advertising publishers are right for you? Before choosing an advertising model for your business, it’s important to know what options you have first.
By understanding these models, you’ll be able to spend money on what actually matters and get better results from your marketing campaign.
They both differ in their pricing models but ultimately are both useful for your business as long as you’re aware of the goals you want to reach.
How to Define CPC
CPC, or cost per click, is an advertising model where you pay the advertising publisher based on the number of times visitors click on the advertisement.
One of the most popular online advertising programs that offer CPC is Google Ads. Through this program, Google will publish your ads on different platforms, from Google Search to its network of content sites connected through AdSense.
With most CPC models, businesses will set first their maximum budget and how much they’re willing to spend for each click.
For example, with Google Ads, you can enter your maximum budget and Google will then calculate an estimate of the amount of clicks you will get.
Your advertisement will then be put on relevant search result pages and content sites affiliated with Google until you get the number of clicks set with the budget.
How to Define CPM
CPM is cost per “mille”, or cost per thousand impressions. This term refers to an advertising model where you pay the publisher based on the number of views, or impressions, your ad receives.
With this model, the payment rate is for every thousand impressions gained on the page that displays your ad, and may or may not translate to clicks or conversions.
The rate of CPM is often lower than the CPC. In 2020, the CPM rate of advertising on social media averages at $4.33.
This means that, for example, with a budget of around $400, you’re already able to gain 100.000 impressions for your business.
When Should You Use CPC
With CPC, you have to pay only when the visitors take action by clicking your ad. This is good when you’re trying to boost conversion.
For example, when your business wants to drive the sales of a particular product package, you’ll want to use CPC. Visitors will click when they’re interested in your product, and you’re more likely to successfully sell your products to an interested audience.
Common CPC Mistakes
There are some common mistakes marketers make while using CPC, which are:
- Forgetting to check your website first — When running a CPC campaign, you’ll be directing visitors to your website, be it for buying a product, downloading brochures, or anything else. If your website is still riddled with bugs and isn’t working properly, it’ll end up as a waste of money.
- Wording your ad copy poorly — With CPC, you’ll want to boost your click-through rate (CTR), or the percentage of how many people who viewed your ad actually clicked. A higher CTR not only means better conversion, but it also increases your Google Quality Score. This can be achieved by writing better copy and putting in relevant keywords.
- Not leveraging Ad Extensions in Google Ads — If you use Google Ads, it has a feature called Ad Extensions that can add more information to your advertisements, such as pricing, promotion deals, phone number, and location. The more information your audience gets, the more likely they’ll be interested in your ad.
- Using keyword matching incorrectly — In Google Ads, there are three categories of keywords marketers can choose: broad match, modified broad match, and phrase match. Phrase match is the most specific, and your ad will only show up when users look up the phrase in the exact order. It won’t bring in as many viewers as the broad match, but it’s more likely to bring in conversion. Make sure you understand the goal of the campaign and choose the right keyword category.
- Not updating your ad copy — Some marketers neglect to update their ad copy and keep the same copy circulating for months or even years. This may impact conversion negatively, especially if the information in your copy is no longer relevant.
When Should You Use CPM
CPM is useful for bringing in lots of views, but it doesn’t necessarily convert to new customers. That’s why many businesses use CPM only when they want to increase brand awareness and visibility.
With CPM, you’re paying for views, which means that with a lower rate you’ll be gaining a lot more impressions on your ads compared to CPC.
While not all of them may make a purchase through your website, it’s enough if your goal is to promote your brand name or message.
Common CPM Mistakes
These are some common mistakes marketers make when using CPM:
- Choosing CPM for the sole purpose of increasing conversions — If you want to boost conversions, you’re better off choosing a more targeted method like CPC. CPM may bring in large numbers, but they’re views that won’t necessarily translate into purchases.
- Putting up poorly made ads — With CPM, the quality of the ads matters. While the primary goal of using CPM may not be clicks, you can still bring in clicks to your ads by putting up only high quality, eye-catching ads.
- Not setting a frequency cap — Frequency capping limits the number of times your ad will be shown to one visitor. Without setting this limit, your ad may be shown multiple times to the more frequent visitors. You may mistakenly think you’re getting lots of views from different visitors, but without frequency capping, you won’t know how many of them are actually duplicate views.
- Not targeting a specific enough audience — When putting up ads, you’re able to choose topics and put in keywords relevant to your business. You may want to target a wider audience by using general keywords, but it may result in lower CTR.
- Choosing a publisher that rotates ads too often — Most sites cycle their advertisements every time a visitor loads their page, but some rotate multiple ads in real-time. This brings in more revenue for the publisher as multiple ads can gain impressions at the same time. However, this means your ad will receive a lot less attention since it appears only for a very short amount of time.
How to Set Realistic Goals
Before choosing which advertising model to use, you’ll have to know what goals you want to achieve from a campaign.
It’s essential to make your goals achievable and realistic. You can use S.M.A.R.T to set the goals of your campaign:
- Specific — The goal focuses on one primary objective of the campaign.
- Measurable — It has an indicator and can be measured or quantified.
- Achievable — It can be attained while still aiming for a higher target, assigned to a specific team.
- Relevant — It relates to the goals of your business as a whole.
- Time-bound — It has a specific timeline in which the goals will be achieved.
By setting these goals, you’ll have a clear idea of what success looks like for your campaign.
Keep in mind that a successful campaign won’t get off overnight. Make sure you also set a realistic target based on the previous campaigns your business has done in the past.
As more and more businesses have moved online, digital marketing becomes essential for a business. Two advertising models marketers commonly use are CPC and CPM.
When choosing an advertising model, be sure to understand the characteristics of each and whether it matches the goals your business is trying to achieve.
After setting clear goals in mind, you’re now ready to pick the right advertising model to drive the best results for your business.