If you want to start a digital ad campaign or run ads on your website, you must have seen the terms CPM, CPA, CPI, and CPC a couple of times already.
CPM, CPA, CPI, and CPC are distinct billing models used for digital advertising campaigns.
All three provide a powerful way to get your online ad campaign started, so which one should you use?
To understand that, I’m going to show you what each model is, how they differentiate from one another, and which model is most suitable for your purpose.
CPM (Cost per Mile, or Thousand) is the cost for 1,000 impressions (miles means thousand in Latin). Essentially, the amount of times your ad is displayed depends on how much you pay.
CPC (Cost per Click), also known as PPC (Pay Per Click) is a billing model where you only pay when a user clicks on your ad, not for impressions as you would with CPM.
CPA (Cost per Action) is the amount you pay when a user does a desired action, after clicking on your ad.
The desired action is the conversion of the user. Conversion can take many forms, like submitting a form, signing up for updates, purchasing a product, etc.
CPL (Cost per Lead) is the amount you pay for each lead generated as a result of the advertisement. In eCommerce, this billing model is often utilized by businesses that sell subscription services or high-value products.
CPI (Cost per Install) is the cost for each installation of software, game, or application on any device.
The most significant difference between CPC, CPM, and CPA is when you should use them. Each billing model performs best on a different stage of the marketing funnel.
To simplify matters, we’ll divide the marketing funnel into 3 main stages: Awareness, Evaluation, and Purchase.
CPM fits best at the top of the funnel, at the awareness building stage. It’s the way to go when you’re trying to build brand visibility as at its core, it works to get your name out there and create brand engagement.
If your ads are engaging and their conversion rate is considerably high, CPM could be the right option for you. The cost of each action will go down as the total actions are taken goes up.
The main downside to CPM is that you may not get a single click to your website. You pay full price for the campaign, regardless of performance.
- Google Display Network – The most popular network is probably the Google Display Network. Their ads alone reach 90% of global internet users, and over 210 million unique visitors in the United States view ads served via the Google Display Network monthly. However, their approval system may be tricky, and if you make a slight mistake, you can easily get banned.
- PropellerAds – Propeller Ads is a self-serve advertising network providing comprehensive ad-serving and optimization technologies for online marketers and web publishers. They work with more than 150K global publishers and offer a variety of ad formats for all screen types which makes it a popular choice among website owners and also offer CPM, CPC, CPL, CPI, and CPA advertising models.
- BuySellAds – BuySellAds allows advertisers to connect with many tech audiences in a single platform. This ad network supports multiple types of ad formats, including display ads, native ads, content ads, podcast ads, and email ads, allowing their More than 4,500 advertisers variety and the possibility to cater to their specific audience.
CPC is most useful in the middle of the funnel. CPC is the best way to drive conversions, whatever type they may be (visits to the website, purchases, form submissions, etc.).
When an online user visits websites that relate to your business, hence they are interested in something similar to what you’re offering, your ad could be displayed to them. When that visitor clicks on your ad, they’re taken to your website and you pay that CPC. And if that visitor converts, your investment was undoubtedly worth it.
With CPC there are fewer impressions, but the ads are a lot more tailored and targeted, and you only pay when a user clicks on those ads.
- PurpleAds – (nothing wrong with a little self-plug) PurpleAds is a great way to reach different audiences worldwide through an exclusive network of websites. PurpleAds allows you to advertise your website, product, or service with non-intrusive ads, easily manage, track and optimize your campaigns for your specific audience.
- Revcontent – Having one of the biggest publisher networks, it serves over 13 billion impressions per month. The vast majority of its traffic is coming from Tier 1 countries, such as the USA and UK – the result of Revcontent’s high-quality standards for both advertisers and publishers.
- Microsoft Ads – The Microsoft Search Network sees 12.2 billion PC searches monthly. Microsoft has the advantage of exclusively serving Yahoo search traffic, powering several digital assistant voice searches, and the ability to target searchers with LinkedIn profile data such as company, job function, and industry.
The CPL billing model is useful to get a database of qualified contacts interested in our products or services with which you can interact afterward and follow up with lead nurturing strategies.
Customers demonstrate interest by opting in, as opposed to merely seeing an impression – that shows they’re qualified leads, displaying an interest in what your business has to offer.
In CPL campaigns, advertisers pay only for an interesting lead. CPL leads are more likely to convert in the future and even become repeat customers. Therefore, it is a low-risk way to build lists of powerful records and member acquisition programs.
At the bottom of the funnel, CPA works best to ensure you end up paying for actual profitable engagement with online users. In that sense, the risk isn’t as high, as you know exactly how each action or sale will cost.
Additionally, you are protecting yourself from potential visitors that won’t convert, as well as click fraud.
The only problem – because CPA is so bottom-funnel, you lose touch with the consumer’s journey. If you’re looking to get attention and spread the word about something, CPA is probably not your best bet.
Similarly to CPA, with the CPI billing model, you also pay for a customer’s action, the installation of your product.
Under this model, advertisers only pay for users that install the app after seeing an ad promoting it. Since CPI campaigns only charge advertisers for confirmed installs, marketers only pay for real users and can protect their budgets.
- Fyber – Fyber is a mobile advertising technology company that helps app developers, publishers, and advertisers execute smart ad monetization strategies across connected devices through a worldwide supply-side platform, allowing advertisers to access the data-driven audiences they want to reach, across in-app, mobile web, and desktop.
- ironSource – ironSource builds discovery, engagement, monetization, and analytics tools for app developers, device manufacturers, mobile carriers, and advertisers. Their platform allows advertisers to connect with active users all over the world and advertise easily on apps.
- AdAction – AdAction is a mobile app media company that partners with leading advertisers and publishers to increase sales, drive app downloads, and engage consumers across iOS and Android platforms. AdAction averages more than 6 million monthly app installs in 180+ countries.
- New businesses – When you’re just starting and need to make yourself known, CPM is your best bet. This is one of the only cases where impressions are of value by themselves. Discounts, launches of new products, social events — all they need is to reach the right people, and CPM can serve dozens of thousands of impressions.
- Well optimized ads for CPC – If you’ve already optimized your ads to get a large number of clicks, consider using those ads with a CPM campaign instead. That way, you are confident that people will click on your ads but don’t have to pay for each click.
- Advertising for a highly engaged audience – Similarly, if your target audience is known to be highly engaged, CPM might be the more cost-efficient way to get your ads out there.
- Your campaign is small – If you are going to reach a small audience or just not going to take high risks, CPC will help you to spend money wisely and with greater control.
- Your click-through rate is usually low – if your target audience doesn’t have a high conversion rate, you should stick with CPC to make sure you only spend money when people go to your website.
- Advertising to a broad audience – if you don’t know who your audience is, you better start by shooting in all directions. In that case, it is better to pay only for successful hits.
- You’re looking for qualified leads – CPL in particular is often used by direct response marketers and brand marketers who are building a newsletter list, customer acquisition program, or rewards program. If your goal is to nurture leads, you don’t want to pay for every click or impression.
- Branding campaigns – CPL campaigns are often preferred for branding campaigns because the business has total control of their brand throughout the entire marketing process, as opposed to channels where another entity can misrepresent a company’s messaging.
- Reduced risk factor – When you’re not paying for ad placement unless that ad gets a substantial result, your budget management is more efficient. And if you’re not getting the desired results, you can reinvest that budget into different placements, demographics, creativity, etc. Ultimately, negative results aren’t nearly as expensive.
- Companies with a focus on leads and customers – If you want more customers to sign up for service or register for your online webinar, download your app, or purchase your products, you would not want to pay for a click received on your ad but for real conversions.
- Game developers and app marketers – Individual CPIs vary wildly depending on the country they’re sourced from. After analyzing your CPI data, you can learn which regional markets are most valuable to you. With this information on hand, you can strategically target users with the most relevant campaigns.
- Reduced risk factor – Seeing as CPI is a more specific version of CPA, the same rules generally apply to it. With CPI you can make sure to pay only for installs of your product, and not waste money on impressions.
All billing strategies have their benefits and drawbacks. They’re similar, but each can be used for different campaign goals.
Whichever billing model you chose for your next advertising campaign, effective usage of CPI, CPL, CPA, CPC, and CPM requires an understanding of ads’ performance, audience preferences, and unique specifics of marketing for your business. You would need to keep an eye out for campaigns progress, monitor and analyze your result to make adjustments in time.
Depending on the objectives of your campaign and the size of your budget, a combination of all several strategies may also be best.