What Is CPC And CPM?

Cost Per Click (CPC) - is an Internet advertising model used on websites, in which advertisers pay only when their ad is clicked, not each time an ad is shown.

Cost Per Impression (CPM) - is an Internet advertising model used on websites, in which advertisers pay for the number of times an ad is show regardless of whether it is clicked on or not.

Below are the total amounts I have spent on Google Adwords, Facebook Ads and Linkedin Ads for my clients. Lets take a look at whether CPC or CPM is better for each.


Google Adwords

What is it? - Google Adwords allows to you place text ads within Google search results and image ads on websites that are part of their display network. See below for an example of an image ad and a text ad.

Advertising Method Used To Date = CPC

Total Spent = $323.83

Impressions = 174,751

Clicks = 204

Click Through Rate = 0.12%

Cost Per Impression Using A Cost Per Click Method = $1.85 per 1,000 impressions

Now lets talk a look at how many clicks and impressions I could have got for my clients if I would have used a CPM model assuming spending stays flat at $323.83. To do this I would have to change from search ads to all display ads as you can only go to a cost per impression model with google on their display network (website where you can advertise with image ads, not text ads). Below is an example of the two different kinds of advertisements.

I have not been able to find much information on what an average CPM cost is on google adwords. On one forum one guy said he gets $4.00 per 1,000 impressions. If we were to use this assumption using a cost per impression model would look like this.

Total Spent = $323.83

Impressions = 80,957

Click Through Rate = 0.12% (assuming the same click through rate, because it would be all display ads the click through rate may be different)

Clicks = 97

Conclusion:

Without actually testing this I don't know that I can make a clear conclusion. I would hypothesis that the CPC method should be better based on the above but without testing I will never really know. The problem is I don't know what CPM rate I would pay, if the click through rate would go up or down and if I get a better customer conversion rate by using display ads then text ads. At the end of the day the real metric that matter is the customer acquisition cost, and without testing this I won't know which method has the better customer acquisition cost. Going forward I am going to test this and see how a CPM method will perform.

Facebook Ads

What is it? - Facebook ads are the ads that appear on the right hand side of every Facebook page. They usually appear below the section titled "People you may know"

Advertising Method Used To Date = CPC

Total Spent = $101.92

Impressions = 532,395

Clicks = 117

Click Through Rate = 0.022%

Cost Per Impression Using A Cost Per Click Method = $0.19 per 1,000 impressions

To look at the equivalent of what this would look like in a CPM method is much easier for Facebook. Facebook currently is suggesting that I pay between $0.37 and $0.60 per 1,000 impressions. Lets Assume I bid $0.50 and see what that looks like.

Total Spent = $101.92

Impressions = 203,840

Click Through Rate = 0.022% (assuming the same click through rate, as there is no reason to think that it would change)

Clicks = 45

Conclusion:

Even if I bid at $0.35, which is below the suggested price, I still get only about 290,000 impressions and 63 clicks, which is no where near the amount I received when using a cost per click payment method. It appears for Facebook, at least for my clients, that CPC is the better way to go.

Linkedin Ads

What is it? - These are the three little ads that appear on every Linkedin page right below the section titled "People you man know". They are located on the right hand side of the screen and are under the title "Ads by Linkedin Members".

Advertising Method Used To Date = CPC

Total Spent = $170.65

Impressions = 200,156

Clicks = 19

Click Through Rate = 0.009%

Cost Per Impression Using A Cost Per Click Method = $0.85 per 1,000 impressions

As with Facebook, Linkedin provides an estimate of what should be paid if you choose the CPM purchasing model. They are currently recommending that I bid $2.06 to $2.12 per 1,000 impressions. Lets assume I bid $2.10. Below is what that would look like.

Total Spent = $170.65

Impressions = 81,262

Click Through Rate = 0.022% (assuming the same click through rate, as there is no reason to think that it would change)

Clicks = 8

Conclusion:

For Linkedin it appears it is also most beneficial to advertise using a cost per click method. Even at the minimum bid allowed, which is $2.00, using a cost per impression setup does not get you anywhere near as many impressions or clicks. I am definitely going to be sticking with the cost per click payment method on Linkedin going forward.



Summary:
It looks like in most cases using a cost per click payment model is the most beneficial for businesses looking to advertise online. The one exception where it is not clear is Google Adwords, which I will need to test to see the results. Watch for the results in future blog posts as I will post them after my test is done. This is a good exercise to go through for your campaigns as well. You will most likely get the same results, but it does not hurt to double check. If there is a way you can reduce the amount of money you pay and get more in return that is always a good thing. Plus, I think Google, Facebook and Linkedin probably already get paid enough so any savings you can find you should take advantage of. The one thing to keep in mind is that these sites are constantly changing, both in terms of how the ads are served and the prices. Given they change so rapidly this conclusion may change in a year or two years time. For right now though, cost per click is the clear winner.


Source: https://www.facebook.com/consultainment