Making Money,  Marketing

What’s CPM, CPA & CPC?

CPM, CPA and CPC are all common acronyms used in marketing to determine how you get paid for displaying an add on your website or blog.

Here is a quick break down on what CPM, CPA and CPC stand for, how they’re calculated and what you should know about each monetization method.

What’s CPM?

CPM stands for Cost per Mile. It’s other name is CPT – which stands for Cost per Thousand.

It’s a pricing model that charges the advertiser based on per thousand impressions. This means that the ad is displayed 1,000 times for a set price. It doesn’t matter if a user clicks or interacts. If the ad shows and gets viewed, it counts towards your earnings.

CPM example

If the CPM is $10, the advertiser will pay $10 per thousand views – or $0.01 per view.

The metric for CPM is views. The more views an ad has, the higher the overall cumulative cost. This is particularly a good strategy for branding campaigns.

Branding campaigns are important because it helps reinforce brand recognition and affiliation that extends beyond online shopping.

The average CPM sits between $5-$50. However, it does depend on the type of product, who the advertiser is, if there is high competition among brands and products, and what they’re trying to achieve with CPM.

What’s CPA?

CPA stands for Cost Per Acquisition. If your objective is to increase sales, CPA is the advertising strategy to go.

Do note that this is different from CPC. The main differences will be further discussed below.

The objective of CPA or cost per acquisition is to encourage users to make a purchase. Amazon affiliate links, for example, is a cost per acquisition advertising model.

The person making the recommendations need to convince the user to make a purchase, in order for the CPA to be paid out.

CPA can also target other specific actions such as newsletter sign up, registration or filling out a form. The pricing for a CPA can be variable or fixed. A majority of the time, it’s often set to a percentage of a product or total cart sale.

CPA example

The running cost of a CPA marketing campaign is based on the cost of acquisition. This means the total spent divided by the number of valid conversions made.

So this means that if we spend $1000 on a campaign and made 150 sales, the CPA would be:

CPA = 1,000/150 = $6.66

This means that the cost per sale is $6.66.

What’s CPC?

CPC stands for Cost Per Click. This means that the metric for advertisers is the number of qualified clicks that came through from the publisher.

It doesn’t matter how many times the ad is served. A few thousand people could see it. The advertiser won’t get charged until someone clicks on it.

CPC, cost per click, is often used to increase web traffic and has the potential to be used as part of a sales funnel.

This differs from CPM, cost per mile, since the marketing model is based on impressions and not interaction.

CPC example

If you spent $200 daily on your marketing CPC, cost per click campaign and get 150 clicks come through to your website, then the average cost is:

CPC = 200/150 = $1.33

This means that each click in your CPC campaign costs $1.33

It’s good to note that CPC, cost per click, cost calculation is very similar to CPA, cost per acquisition.

Thank you for reading. I hope you’ve found this guide useful.

I am currently embarking on a Prototype Year to experiment my way into a life I want. This space is for documenting that journey.

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