What is CPM?
In online advertising and marketing, CPM stands for ‘cost per mille’. It is a digital advertising costing model that charges advertisers, marketers, and brands a fixed amount for every 1,000 times their ad is shown to their target audience.
If you wish to learn more about this concept, check out the FAQ section below:
Question #1: What is the difference between CPM and CPC?
The main difference between CPM and CPC is how each model charges advertisers, marketers, and brands.
As we have seen earlier, CPM charges the person running a campaign a fixed amount whenever one of their ads gets shown to their target audience 1,000 times.
In contrast, in the CPC (cost per click) model, as the name suggests, the advertiser, marketer, or brand is charged only when someone clicks on their ad. This means that it does not matter whether their ad is shown 100 or 100,000 times. If they only get 10,000 clicks, that is all they will be charged for.
Question #2: Is CPM better than CPC?
The short answer is no—but it goes both ways. CPM is not necessarily better than CPC in the same way that CPC is also not necessarily better than CPM. It all depends on the campaign’s goals.
In general, CPM works best for campaigns aimed at generating, improving, or retaining brand awareness. The goal here is simply to get in front of as many of your target customers (or followers) as often as you can. You are not actually trying to get clicks or conversions. You are just looking to secure your position as their top of mind brand so they come to you once they are ready to sign up, download, register, make a purchase, or do whatever it is you need them to do.
In contrast, the CPC model is way more suited for campaigns where the goal is to actually get glicks, regardless of what those clicks are for.
This model is also often used by advertisers, marketers, and brands to gauge the effectiveness of their campaigns at acquiring leads. The formula they use is as follows:
Total ad cost / total number of clicks = CPC
For instance, if you spent $5,000 on a particular ad and got a total of 3,000 clicks, then your CPC would be $1.67. You get this by simply inserting the numbers into the formula above:
$5,000 (total ad cost) / 3,000 (total number of clicks) = $1.67 (CPC)
The lower this number is, the more effective a CPC campaign is.
Question #3: What is the difference between CPM and CPA?
Just like with CPM and CPC, the main difference between CPM and CPA is how each model charge advertisers, marketers, and brands.
Again, in the CPM model, you will only be charged whenever your ad is shown at least 1,000 times. In contrast, in the CPA model, you will only have to pay in the event of a successful conversion (e.g., a lead makes a purchase).
Question #4: What are the limitations of CPM?
The main limitation of CPM is that it can get tricky to not only accurately identify legitimate ad views, but also prevent fraud.
Let us take a closer look at each one in more detail:
First, identifying legitimate ad views can get tricky because a person visiting a website looks virtually the same as a web crawler doing the exact same thing. This means that an advertiser, marketer, or brand may end up also paying for web crawler views that do absolutely nothing in terms of generating, improving, or retaining brand awareness.
Second, there is also very little advertisers, marketers, and brands can do to prevent website owners from using bots or hiring someone to do it for them to artificially bump up their web traffic and, as a result, their ad views as well.