Last updated: December 2016
Companies (advertisers) run online advertising campaigns to create brand awareness and persuade customers to purchase their products and services. There are a variety of methods which advertisers can chose with regards to how to pay for the campaigns. Two most widely used methods are called CPC and CPM. Advertisers usually run their ad campaigns through ad networks. Ad networks use websites and blogs of their registered publishers to run the campaigns. The discussion that follows touches on the definitions of both CPC and CPM and the differences that exist between them.
What is CPM?
CPM stands for cost per one thousand impressions. We can think of impressions as views of ads by the readers of a website/blog. Views are different from pages. For example, a web page may contain 5 ads. When a reader reads that page and all five ads are served, it will be considered five views.
What is CPC?
CPC stands for cost per click. It is about the clicks the visitors of a website/blog make on the links, in-text ads, banners etc. It refers to the actual price a company pays for each click made by visitors of the websites and the blogs where the ads are served.
Differences between CPM and CPC
Before we start discussing the differences, let us briefly touch on the similarities between CPM and CPC. Advertisers pay ad networks for the views and the clicks made by the visitors as the latter run ad campaigns through their networks. Sometimes, advertisers may work with publishers (website owners/bloggers) directly.
Let us now focus on the differences between CPC and CPM. New websites and blogs with limited traffic are usually better off with CPC, while sites with high traffic are better off with CPM. With CPC model, publishers will not get paid unless the visitors click on the links, whereas they get paid with CPM model as long as the adverts are served.
So, which one is better? The answer is not very straightforward. It may be difficult for both advertisers and publishers to draw a conclusion without an actual test. However, from publishers’ perspective, CPC is usually better if they have low traffic. On the other hand, CPM is better if they have high traffic. From advertisers’ perspective, CPC is better when the objective of advertising campaign is making sales. Conversely, CPM is better if the objective is creating brand awareness. It should be noted that not all ad networks have both CPC and CPM options.
Author: M Rahman
M Rahman writes extensively online with an emphasis on business management, marketing, and tourism. He is a lecturer in Management and Marketing. He is a graduate of Leeds Metropolitan University and London South Bank University.