Online ads are sold under a few basic pricing models. The most popular ones are CPM and CPC. And the never-ending question is “Which one to use?”. Before answering that question, you need to understand the difference. If you’re looking for what differentiates CMPs vs CPCs, you’ve come to the right place.

First, definitions:

In an ad buy, there are two basic cost units:

  1. CPM = Cost per “mille,” or 1,000 impressions
  2. CPC = Cost per click

Good to know, but why would I choose one over the other?

CPM is best used for driving awareness and brand engagement. It’s the way to go when you’re trying to build brand visibility. You can be more specific with what types of pages you target – for instance, if your business is “Sandy’s Sailing,” your ads will tend to come up on sites advertising anything ocean-travel oriented — sailing vacations, tropical travel, fishing gear, etc.

The main thing to understand is that you buy 1,000 impressions for however much your advertising partner charges, and 1,000 ads will appear across the web.

CPC is best used to drive conversions, whether these are website visits or sales. When a shopper has visited online sites for sailing, your ad for sailing trips from Miami to Aruba could be displayed to them, showing them a product or package they’re likely to be interested in.

When the visitor then clicks on the ad, they’re taken directly to your site and you pay for the cost of that click. If a sale occurs, then your tiny investment will have been a valuable one.

They both sound great, depending on campaign goals. Are there any drawbacks?

CPM is designed to build brand awareness. Which is good, but the main downside to CPM is that you may not get a single click to your website. The problem is that you pay full price for the campaign, regardless of performance. Often times, you pay for impressions that no one sees. Ouch.

CPC on the other hand is the best way to drive performance (revenue) or a particular sort of action (e.g. visits to the website, vacation package purchases, brochure downloads, etc.).  With CPC there are less impressions, but the ads are a lot more tailored and targeted, and you only pay when a user clicks on those ads.

Anyone who clicks is very interested in what your ad has for sale. Therefore, you get full transparency on when someone clicks on your ad, and you’re only paying for that click – which equals performance. A tech partner that charges on a CPC pricing structure will eat the cost of any ad that isn’t clicked on, so the risk is on the tech partner, and not the advertiser.

Where can a CPC pricing model be best applied?

Either CPM or CPC can be valuable, but if you’re looking for conversions or acquisitions, a CPC pricing model is probably your best bet. You pay only when shoppers engage with your campaigns, and, as a result, you maximize your ROI.

CPC for Performance-Based Campaigns

With CPC, you only pay when your ad is clicked, meaning it’s in your best interest to invest in ads that attract viewers. A skilled technology partner can help you leverage your creative and product feeds so that the right message is delivered to the right audience at the right time. When these elements are fully optimized, your CPC campaign can drive results that’ll have you swimming in profits

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