CPM Internet Advertising

CPM, CPC, CPL, CPA: Which Online Ad Models are Best?!

featured imageAs a publisher, you may either be:

In either case, it’s important to understand how different online ad models—CPM, CPC, CPL, and CPA—can impact what you offer to advertisers, the revenue you can expect to generate, and the risk you take on.

What it is

This is also known as “cost per mille.” As a publisher, you charge a flat rate for one thousand displays, or impressions, of an advertisement to your audience. About 33% of internet ad revenues in 2013 were priced using CPM (up from 32% the previous year.)

Different ad sales management systems can help publishers track when an ad has reached one thousand impressions. A variation to this approach is setting a flat rate for an advertisement to appear for a specified time period on a website page or section.

Advantages to publishers

  • CPM revenue can be more predictable since publishers likely know their average page views in a given month.
  • CPM—more than CPC, CPA, and CPL—lets advertisers reach a large number of people. Advertisers interested in brand awareness over the immediate sale may prefer publications that offer this model.
  • CPM puts lower requirements on your publication. As long as you display advertisements to your audience, you are completing your part of the relationship.

Disadvantages to publishers

  • Publishers may need to offer rich media advertisements, such as interactive games, videos, and pop-outs, to help advertisers get value from impressions.
  • Publishers need to demonstrate that their website traffic offers value since there may not be a direct connection between the advertisement and the return on investment.

Should you use it?

If your publication offers a highly-engaged audience with high-volume traffic and if your advertisers are more interested in brand exposure than making the immediate sale, CPM may be right for your publication.

CPC is one of several performance-based online ad models. Someone on your website clicks an advertisement, and you, as the publisher, are compensated for that action. Ad sales software can help control for accidental clicks and abuse.

  • You may be able to draw more advertisers with CPC than CPM because the return on investment is more measurable (for more details, see our recent post, “5 Possible Reasons You’re Not Selling Ads.”)
  • Publishers can collect more data with CPC to use in selling ads. For example, you can track average click-through rates (the number of times ads are clicked divided by the total impressions) to set your advertiser’s expectations.
  • CPC revenue is less predictable than CPM because you can’t be certain how many people will actually click.
  • Clicking advertisements may take visitors away from your website. This is particularly a concern on mobile devices, where changing sites may be more distracting to visitors.

You can think of CPM, CPC, and CPL / CPA as a range, increasing the requirements for what a publisher must deliver to earn revenue.

With cost per lead, advertisers compensate you when someone views an ad on your site, clicks that ad, and then takes a further action to become a qualified lead for a sale. This might mean signing up for an e-newsletter, reward programs, or free website membership.

Cost per acquisition is similar but has an even higher bar. Publishers only receive payment for completed sales (i.e. the e-newsletter subscriber goes on to purchase services from the advertiser.)

  • The very-limited risk that advertisers face can make CPL and CPA easier for publishers to sell than CPM and CPC.
  • Creating an effective CPL or CPA program requires an investment of time and resources from both advertisers and publishers. This can keep advertisers tied to an ad sales program longer.
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