CPM vs CPC – What’s The Difference & Why Does It Matter?

 CPM vs CPC – when it comes to online advertising and ad campaigns these 2 options are one of the many you need to consider. From social media options ranging from Google CPM to Facebook CPM and other ad network mediums, it can be difficult to narrow down the best platform to maximize your number of impressions and also optimize your cost per click.

No matter if you’re a burgeoning start-up or an already established business, it comes as no brainer that you’re going to want to pay the least amount of money per click and per thousand impressions. With the myriad of options you have when it comes to CPC and CPM, you need to intimately know the benefits and disadvantages of both of these cost per click systems before you can even begin your campaign – lest you want to go over budget.

Here’s what we’ll cover

CPM vs CPC -What Pricing Model Should You Use For Your Online Ads?

cpm vs cpc tips

One of the most critical components of digital marketing is amplifying your brand or business online. Through social media, website content, blog posts and online ads, marketing business, products or services online can be a challenging and sometimes confusing task.

When setting your budget for these types of digital marketing initiatives, it is important to understand the language used around pricing models, especially when it comes to online ads. When creating an online ad campaign, whether on social media or Google, it is important to ask yourself: Which costing model should I use? What pricing model will give me more bang-for-my-buck? What are my overall goals for this online ad? These are all important questions to ask yourself when marketing your products or services through online ads.

What is CPC?

CPC or “Cost-Per-Click” is a popular pricing model designed for online ads. In the CPC model, you pay a set fee every time your online ad is clicked.

For example, if your rate is set to $0.30 a click, you pay $0.30 every time that particular ad is clicked. If your ad is clicked, say, a 1000 times at a rate of $0.30 per click, you would pay the ad provider a total of $300.

The key thing to remember in CPC pricing models is that the more clicks the ad receives, the more costly this ad will be to run. Online ads with high click potential will increase your profits through direct sales and website traffic.

What is CPM?

CPM or “Cost-Per-Mille” refers to a pricing model based on impressions or the number of times an ad is viewed online. A “mille” is the term designated for every thousand (1000) impressions, or views. With this model, you pay an online ad provider every time your ad is viewed 1000 times or when it receives a thousand impressions.

This price model is based on viewership and is not impacted by the number of individuals who click your ad. This ad budget model is easy to adjust if you are working within a tight dollar amount as it allows you to target how large of a budget you’ll like to allocate per every thousand impressions.

Don’t go into an advertising campaign blindly. Use information from a variety of sources to best target customer pain points to get a better return on your investment. Learn more in  Contextual Marketing 101 – Using Data For Impactful Ad Campaigns.”

When to use CPM vs CPC?

Both CPC and CPM pricing models have their own strengths and weaknesses when it comes to budgeting online ad content. Depending on your business model, products and services, one of these pricing models may better suit your needs than the other. We’ve highlighted a few reasons why you may choose either CPC or CPM pricing when executing digital marketing campaigns that involve online ads.

Advantages of the CPC (Cost-per-Click) Model

One distinct advantage of the CPC or Cost-per-Click Model is the increased likelihood of your ad driving direct sales, often at a lower price point.

The CPC model is based on the number of clicks your ad receives, not the number of views or impressions. This means that a significant number of people can view your ad, increasing your overall brand visibility, without you being charged additional ad costs from your provider.

This type of model is valuable for brands looking to increase direct sales, often through an online e-commerce platform or marketplace.

We suggest using CPC pricing models for campaigns that look to increase awareness and drive engagement, whether that’s through visits to your website or direct sales.

This pricing model is particularly beneficial for online retailers and independent businesses who rely heavily on direct sales, especially if products are at a low price point, low enough to encourage impulse buying. Think clothing, food, entertainment and other consumer goods. 

Disadvantages of the CPC (Cost-Per-Click) Model

The primary disadvantage of a CPC pricing model is the risk that your ad may underperform and be quickly moved to the bottom of your ad provider’s online rotation. When the ad provider is only making money on cost per click, this significantly lowers the threshold of revenue-generating opportunities. Therefore, if a CPC priced ad is not seeing significant engagement, it is often shuffled down the queue of online ads decreasing the likelihood that your ad is making an impact online.

Advantages of the CPM (Cost-Per-Mille) Model

The CPM or Cost Per Mille model ensures that at least a minimum number of people will see your ad online. This type of ad is best used for awareness and interest generating campaigns, not necessarily website clicks or direct sales conversions. 

If you are looking to build brand visibility without the risk of your campaign getting shuffled to the bottom of the ad queue, a Cost per Mille pricing model is the best option. 

This type of ad is also beneficial for products or services offered at higher price points. These products often require significant consumer interest and are not often bought as an impulse buy. Think services and products that require a considerable amount of time and investment such as insurance, renovations and other significant services. 

However, by building brand awareness and product recognition online, CPM ads help consumers recall certain products or services they have been exposed to online when debating a big purchase. New car sales would be a perfect example of the type of campaign that would be best suited for a CPM online ad pricing model.

Disadvantages of the CPM (Cost-Per-Mille) Model

Often brands or businesses are deterred by CPM pricing models based on the unpredictable correlation between your online ad and direct sales. When building brand awareness through an online ad in a CPM model, a number of people may see your ad, but few may click or purchase your product or service. 

This may feel like you spent your money for little to no result. However, there are significant checks in place to help ensure your ad is shown to a relevant audience which can help encourage engagement. When running a CPM campaign, it is important to work closely with your ad provider to maximize your target audience networking and targeting.

Key Takeaways On CPM vs CPC

Whether you choose the CPM vs CPC pricing model when creating your online ads, it is important to think ahead and budget for unpredictable ad success or failure. Understanding how and why an ad does (or doesn’t) perform well is a critical step in the life cycle of any digital marketing strategy. Once you identify what is attracting a new audience, it is important to replicate that formula to best amplify your brand message online.

Whether you are a small, medium or multinational level business, there is a CPC or CPM pricing model strategy that will work best for your brand. Before determining the pricing structure that works best for your online ad campaign, it is important to identify the ultimate outcomes you wish to accomplish and structure your ad budget around these factors.

Vincent Lee

Written By Vincent Lee

The Managing Editor at Advesa, Vincent is a mechanical keyboard enthusiast, a lover of cats, and a purveyor of fine roasted matcha teas. When not writing, he enjoys exercising and biking around his beautiful hometown of Vancouver. He is also a strong supporter of the oxford comma.