Cost Per Click (CPC) and Cost Per Impression (CPM, which stands for Cost Per Mille, with “Mille” meaning thousand in Latin) are two different pricing models used in digital advertising to charge advertisers for the placement of ads online. Here’s how they differ:
Cost Per Click (CPC):
- Definition: With CPC, the advertiser pays each time a user clicks on their ad.
- Purpose: This model is typically used when the advertiser’s goal is to drive traffic to a website or landing page.
- Cost Efficiency: CPC is considered cost-efficient when the goal is to ensure that the budget is spent on potential customers who have shown interest in the ad by clicking on it.
- Risk: The risk is that a high number of clicks does not always translate to conversions. Advertisers need to ensure that the clicks are high-quality and likely to lead to the desired action (e.g., a purchase or sign-up).
Cost Per Impression (CPM):
- Definition: With CPM, the advertiser pays for every thousand impressions (views) of their ad.
- Purpose: This model is often used for building brand awareness and visibility since the cost is based on the number of times the ad is shown, regardless of user action.
- Cost Efficiency: CPM can be cost-efficient for campaigns aimed at exposure and top-of-mind awareness, as it ensures the ad will be seen a certain number of times.
- Risk: The risk with CPM is that there is no guarantee of engagement. Many users may see the ad, but there is no direct measure of how they interact with it unless combined with other metrics.
- Payment Trigger: CPC costs are incurred when an ad is clicked, while CPM costs are incurred when an ad is displayed to users.
- Campaign Goals: CPC is typically used for direct response campaigns where the goal is to drive specific user actions. CPM is used for campaigns aimed at increasing brand awareness or delivering a specific message.
- Budget Control: With CPC, you pay for engagement, which can be more directly tied to ROI. With CPM, you pay for potential reach, which can be more difficult to tie directly to ROI but is useful for branding purposes.
- Performance Measurement: Success in a CPC campaign is measured by click-through rates (CTR) and conversions, while success in a CPM campaign is often measured by the number of impressions and the reach of the ad.
Advertisers often choose between CPC and CPM based on their campaign objectives, their budget, and how they want to engage with their target audience. Some platforms offer both CPC and CPM, and advertisers can decide which one aligns best with their marketing goals.