CPM vs. CPC vs. CPA
CPM, CPC, and CPA are three distinct models for digital advertising that can make or break a campaign. Everyone likes the idea of paying less, but if you optimize your campaigns to lower the wrong one of these three, you could set your campaign up for failure — no matter how great your strategy or creatives.
Here is what you need to know about CPM, CPC, and CPA to ensure you’re optimizing correctly.
CPM
What It Is
Cost per mille (CPM) measures the cost of one thousand impressions (mille is “thousand” in Latin). It’s how you measure the number of people who see your ad. For example, a $2 CPM means it costs $2 to put your ad in front of 1000 people.
Out of the three, CPM has the most history and is perhaps the most misunderstood. Let’s dive in.
Funnel Fit
CPM fits best in top-funnel awareness initiatives. It can inform strategy elsewhere, but at its core, it measures how many people have seen your ad.
Its history lies with traditional advertising strategies. In the old days (i.e., early to mid-90s), display ads were bought and sold similarly to billboards. As real-time bidding (RTB) technology emerged, CPM became a relied upon model to buy and sell advertising inventory both because it matched the technological development of its day and because it was easy to understand.
CPM is great for raising awareness among your target audience. A good use case would be a city government spreading the word that a bridge will be closed for construction. A low CPM will mean you’re paying less for more people in a specific geographic area to see your message.
Things to Keep In Mind
If you’re looking for conversions in your campaign, you’re almost always better off not optimizing for a low CPM. If you shoot for the lowest CPM possible, your ad will land in junky inventory that will not likely convert viewers.
If you’re looking for donations, for instance, a dirt low CPM will not put you in front of people likely to donate. It will put you in front of whoever it can, leading to wasted money, bot traffic, and fraud.
CPC
What It Is
Cost per click (CPC), also known as pay per click (PPC), measures the … cost per click. Pretty self-explanatory, but there are nuances to be aware of as you use it in modern campaigns.
CPC is where you only pay when a user clicks your ad. You don’t pay for people to view your ad like you would with CPM.
Funnel Fit
Generally, CPC is best for mid-consideration to low conversion funnel strategies. Like CPM, it can inform strategies elsewhere, but its best fit is mid- to low-funnel.
At its core, CPC provides insight into the effectiveness of your ads. By optimizing for a low CPC, you’re lowering the amount of money you pay to get someone to click your ad.
A low CPC means you’re paying very little for a lot of traffic. In other words, your ad is effective at getting people to click.
CPC has its origins in early paid search advertising in the mid-90s. It was one of the first precursors to RTB technology as we know it today. As such, it’s deeply ingrained in many campaign strategies but has its pitfalls.
Things to Keep In Mind
When you optimize for a low CPC, you’re putting your ad on sites and in search positions where people are most likely to click. These types of sites, though, can be fraught with fraud and bots. Brand safety is always a must, but CPC should not be considered without considering fraud.
Another thing to keep an eye on is the relationship between clicks and website sessions. If a person clicks your ad shouldn’t it lead to a website session? Not necessarily.
CPA
What It Is
Cost per acquisition (CPA) measures the cost of one person converting. This could mean form fills, demo requests, sales, etc. Whatever counts as a “conversion” for your business.
CPA is a step further from CPC because you only pay when someone takes your desired action. If a person sees and clicks your ad, but doesn’t convert, you don’t pay.
Funnel Fit
CPA is a solid bottom-funnel strategy. It’s the get stuff done approach. Like CPM and CPC, it can inform other strategies, but at the end of the day it’s focused on driving conversions.
Because it’s so far down the funnel, CPA provides not just insight into the effectiveness of your ad, but insight into the effectiveness of your website copy, forms, conversion strategy, etc.
Optimizing for CPA is more nuanced than optimizing for CPM and CPC. It’s about creating an environment the user finds convincing. This could mean anything from tweaking website copy to changing around the order of form fields to swapping ad creative.
It requires you to put on your marketing detective hat and think about the psychology behind your message and how it’s positioned. Once you get an eye for it, you’ll become a better marketer across the board.
A low CPA means you’re paying little for a lot of conversions. This in turn means your CPM is probably pretty high because you’re only targeting people that are likely to convert.
If you do achieve a low CPA, you know you’ve nailed your targeting, messaging and strategy for driving conversions.
There’s a lot to glean from using CPA but it’s not necessarily better than the others. It still has its caveats.
Things to Keep In Mind
CPA is so bottom-funnel that it can be hard to gain insight into anything mid- to top-funnel. If you’re looking to get attention and spread the word about something, CPA is probably not your best bet. You would be better with CPM in this case.
There are also a lot of factors that go into CPA, so understanding what exactly needs to change in order to optimize your campaign can require some trial and error.
CPM, CPC and CPA all have their distinct place in your digital strategy. Understanding the role they play, their strengths and weaknesses is essential to becoming a better marketer.
