Basics of CPM, CPC & CPA – The Online advertising pricing models

Debates about which form of advertising; CPM, CPC or CPA is more profitable, have been lasting for long and will hardly ever finish. Each advertiser and publisher should know the nature of all of them and when to implement it. In this article we are going study all these approaches and reveal pros, cons and future of them. This post was published in cooperation of Adsmarshal – online advertising company that provides all types of online advertising models including CPM, CPC or CPA.

CPC (Cost per Click) or PPC (Pay per Click)

Everything is simple here – you pay each time your ad was clicked.

Advertisers like CPC or PPC model as the results can be seen almost at once. But it is not the only advantage. Business success is more likely to be gained, when both parties are interested in it – it is exactly the case with cost per click. The advertiser is trying to make his ad as much attractive as possible, and the webmaster makes efforts for more users to click the ad (SEO optimization, interesting content, puts ads in better places etc.).

It is also should be taken into account that click is not always a conversion. The situation gets more complicated because such phenomenon as “fake clicks” on competitors’ ads became more often.

Expert commentary

In general, the predictions for this advertising model are quite sad. However WordSteam founder, Larry Kim, is quite positive about CPC, especially in social media like Facebook.

CPM (Cost per Mile)

By using this model you state how much you are ready to pay for a 1,000 of impressions of your ad to people. It is often used banners, however exceptions exist.

One benefit is plain to see – the number of those who have watched the ad will be bigger than those who clicked.

The advertiser always gets exact number of impressions. It is possible to escape driving up the numbers by calculating an impression only once to the same user in terms of one session.

Benefits from model:

• cheaper than CPC;
• passive income – just put the ad at the place where people will certainly see it and get your money.

What experts think of it

CPM model seems to be quite prominent, especially for video advertising. Andy Plesser is inclined to think that CPC is going to suffer changes, and will be counted if the ad was watched till the end.

CPA (Cost per Action)

Here webmaster earns money when a specific action was performed, it may be subscription, registration, soft downloading etc. All these actions are called “leads”.

Here the advertiser get high quality traffic. It is obvious, as if the person subscribes or fills in a form, so he or she is interested in a product, thus he presents a target audience.

Main benefits

• Here we have a vivid “win-win” model, as webmaster gets more money for leads and the advertiser is happy to pay for useful actions of his clients.
• Lead is more likely to turn into a conversion rather than in CPC or CPM model.
• No fake clicks or driving up the numbers.

So, what to choose?

Each model has its own pros and cons. CPC may be perfect for one business, but pretty irrelevant for another. Skilled webmasters gain higher results by making experiments with different models and choose what will be more suitable both for them and advertisers.