CPM vs CPC – Media Buying

Guest post by Elena Rudneva

A lot of words have been written on this subject, since these price models are key ingredients that affiliate marketers must know by heart if they want to have a shot at success in this field.

In this article, I’ll describe the meanings, intricacies and details of these acronyms.

Basic Definitions

Ready? Let’s start with CPM. CPM stands for cost per 1000 impressions. This means you’re setting the price you wanna pay for a thousand impressions of your banner/popunder for the users to view.
What about CPC? This acronym means cost per click on your ad. It means you’ll pay for each click on your banner.

Going Further

Let’s try to dive a bit deeper. Let’s imagine you’re paying directly for each click. At the same time, you’ll avoid one other step-for-click to be created. This is partly why clicks seem to be more appealing than impressions. This could be why a lot of affiliate marketers profess their love of CPC. Even so, this price model may not always be the best choice!

When working on CPM, you’re paying per each impression. This means you need to get the highest number of clicks possible from them. What’s the trick? You’ve got to work carefully one your banners. You should test them, later ascertaining how your CTR (Click Through Rate – ratio between banner clicks and impressions) alters according to text, banner image or even colour. Why should you spend so much time testing? Because you’ve got one goal: making your CTR higher!

Having trouble understanding the process? No worries!

Concrete Example

For a while, you’re gonna imagine you can purchase the same traffic quality either for $0.05 CPC or $1 CPM and you’ve got $100 for a budget. By going with CPC, you’ll get $100/$0.05=2000 clicks. CPM, on the other hand, will allow you to get 1 000*$100/$1 = 100 000 impressions for the same exact amount of cash. If your banner’s CTR is 1% (usually a low value), you’ll get 100 000 * 1% = 1 000 clicks for the exact same budget.

It’s easy to assume the CPM model is more profitable, in the event that you’ve got a higher CTR (which means you get more clicks). This is why you need to be thorough at the optimization stage when playing with CPM.

Premium Spots

CPM also gives you the chance of purchasing traffic from spots regarded as premium – meaning they’ve got a huge CTR. The CPC bidding system is much more expensive than CPM. Indeed, with CPM, you get the same clicks and get away with spending less money.

Frequency Cap

There’s something else you should get to know that’s actually pretty great about working with CPM. This “technique” can give you some additional monthly income and it’s called frequency cap. This is the frequency in which your ad is shown (once, twice, three times a day, etc.) It basically means you can have a greater number of impressions. In turn, this increase means more conversions. You can also use the frequency cap move to get a different effect. In fact, you’re able to limit the number of impressions, especially if they don’t convert even though you’re getting clicks.

Misleading Banners

Moreover, if you happen to use banners that mislead users and promise great videos that are just a ruse (at the end the user gets redirected to a silly game, for instance), you’re condemning yourself. Why? Because you’ll be shattering people’s expectations. This means you’ll get a lot of clicks but little to no conversions at all. This happens because users know you’ve cheated them by implying they’d see something amazing. This makes sure users don’t want to purchase the product and that’s why this idea that some Media Buyers insist on is so ludicrous. It’s quite obvious: if you’re paying per each click, it should be common sense that you don’t want to make a huge number of people click for nothing.

You’ll pay per click but nobody’s going to buy your content so doing this is utter nonsense. This is the main reason why I’d always suggest you use CPC only if your banner has a relation with the product you’re selling. If you mislead users, it’s bad for them but even worse for you.

Let’s say you feel your ad network’s traffic quality isn’t exactly pristine due to an excessive use of bot traffic (this means that robots see your page but will neither click nor convert). Then, I’m sure it’s better for you to go for the CPC method. CPC allows you to pay only for real human beings that click the banner. This can obviously save you money, since you won’t pay for useless bot impressions like what happens on CPM.

CPC – Stability Becomes Real

CPC is more stable. Why? Because you know how much you have to spend in order to get the clicks you want. This makes the CPM model a bit riskier, particularly if you’re testing an inadequate banner or if your users have become saturated, finding your banners unappealing. This problem can make your CTR go down and this means your performance deteriorates.

Here’s my opinion: I suggest you go for CPC only if you’ve got an awesome offer that you know has a high rate of conversion and whose banner is fully adapted to that particular offer. This will make you get targeted links on the banner which means you’ll get lots of conversions, inasmuch as the CR of the offer is great too. This will also decrease the amount of time you spend optimizing since you won’t really care about having to boost your CTR.

When to go CPM

Now let’s imagine something different. Let’s say you’re using an offer rotator and therefore you can’t adapt the banner to a specific offer. Even so, you know you’ve got some great banner skills and your banners are immediately appealing to all users. In this very particular example, you should definitely give CPM a try. Why? Because you’ll get one other parameter you can use to boost your profits, which is the banner’s CTR.

Conclusion

These two offer models can be like a treasure chest, in case you know how and when to use them. If you’re fully aware of your skills as a Media Buyer, then it’s going to be easy for you to make it big by exploring either of these price models.

Guest Post by Author: Elena Rudneva is an Online Analyst on Mobidea

Website: https://www.mobidea.com/

Twitter: @mobideanews

Facebook: https://www.facebook.com/Mobidea/?fref=ts

Photo Credit: jlodder Flickr via Compfight cc

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