It is the era of digital advertising, and billions of people use the internet for different purposes such as communicating, shopping, learning, etc. With online shopping increasing by the day, digital advertising has become a significant revenue source for publishers.
If you are a novice in the advertising game, it may all feel a little overwhelming. However, website publishers must understand the different factors affecting their ad campaigns before taking the plunge.
Read on to learn more about a few important metrics to track online advertising efforts.
CPM (Cost Per Mille)
What is CPM?
Cost per mille (CPM) is also referred to as cost-per-thousand impressions. It is the cost per thousand impressions (an impression is the number of digital views). In other words, CPM is the cost paid by the advertiser to the website for every 1000 views of the ad.
To better understand what is CPM, let us dive into the concept of monetization of advertisement. Consider an ad placed on a website that has considerable traffic. When the ad achieves 1000 views (impressions), the advertiser will pay a set amount to the website publisher. This is called CPM.
CPM is a standard approach to determine advertising costs and to set ad prices. To calculate the cost of a CPM campaign, you must multiply the total ad impressions with the CPM rate and then divide the result by 1000.
Interpreting CPM
CPM can be affected by several factors such as geography, ad usage, ad viewability, the device used, the number of ads within the page, etc. To understand whether CPM will be beneficial for your website, you must consider the following points.
- Analyze the data related to your past performance.
- Compare results with the market averages.
- Understand the impact of CMP on your total ROI.
Based on the results, you may determine if the approach is suitable for your advertising endeavors. A low CPM may indicate poor traffic quality to your website. However, a high CPM may not yield better earnings if some ad inventory is not sold.
What is CPM Campaign for Publishers?
CPM works as a profitable pricing model for ad spaces for publishers. Through CPM, every ad is compensated, irrespective of the user action. CPM also makes it easy for publishers to predict the amount of revenue generated through the ad space. Since ad impressions are tangible factors, the pricing model offers better visibility between the publisher and the advertiser.
What is CPM for Advertisers?
CPM is important for advertisers too. It helps them to understand how many people have viewed their product or service. It helps them to determine their brand reach within a given budget. Advertisers can combine CPM with other metrics such as CTR and conversion rate to evaluate their investment in a particular website.
CPC (Cost Per Click)
Now that we are familiar with what is CPM, the next important metric is CPC. Cost-per-click is a digital advertising model in which the advertiser pays the publisher every time their ad is clicked on the publisher’s website or app.
There are two forms of CPC. They are,
- Flat-rate CPC: The publisher and advertiser agree upon a fixed rate per click in advance. The highly sought-after keywords have a higher fixed rate than terms associated with fewer searches.
- Bid–Based CPC: Google AdWords is the most popular form of bid-based CPC. In this approach, the advertiser pays the maximum cost they can afford per click. The higher the amount, the higher the chance of the ad to appear on the page (ad rank).
CPC is beneficial for both publishers and advertisers. When you have a good CPC, publishers can be assured of relevant traffic to their websites. Advertisers believe CPC is fair and beneficial because they only pay for the visitors to their landing page.
CPA (Cost Per Acquisition)
CPA can also be referred to as Pay Per Performance (PPM). The advertising model allows publishers to get paid when a user clicks on an ad in their website or app and performs an action. The action may be a purchase, making an inquiry, filling out a form, etc. For a good CPA, your content must be well-tailored to the ad and the target audience. CPA comes with a high risk but can be highly rewarding for the publisher. CPA works like affiliate marketing. It is a low-risk approach for advertisers. CPA can be calculated by dividing total ad spend by total attributed conversions.
