Online Advertising Acronyms
If you're relatively new to Internet marketing, you may feel like you're drowning in acronyms. You have to choose between CPM or PPC when you place an ad in many online outlets, but you've probably heard "CPC" rather than "PPC" in your marketing reports and you're probably aware that it's actually CPA you're most concerned about.
Let's start by clearing all that up:
CPM means Cost Per Thousand Impressions. In this system, you pay based on the number of times your ad is displayed on a web page, regardless of whether anyone clicks on your ad.
PPC means Pay Per Click. In this system, you pay for each click through from your advertisement, regardless of how many times your ad is shown. Typically, you'll set a maximum price you're willing to pay for clicks and your actual cost will be determined on an auction-style basis.
CPC means Cost Per Click. When you're advertising on a PPC basis, your cost per click is easy to determine; you set the maximum and receive reports on what you actually paid. When you operate on a CPM basis, determining your cost per click requires calculating the actual number of clicks received (on average) per thousand impressions and then dividing by the CPM.
CPA is the Cost Per Acquisition. This, of course, is most important to your business, since it tells you how much it cost to acquire a new client or customer. You'll compare that cost to the short and long-term value of the customer to determine the profitability of your advertising efforts.
Whether advertising on a CPM or PPC basis is better for your business will depend on a variety of factors. In fact, the answer may be different for different campaigns. The best way to determine which is most profitable for you is to test both and calculate both your CPC and your CPA. You'll want to factor in the value of exposure as well. While a PPC campaign allows you to pay only for "success," in that you don't pay unless a prospect actually visits your website, don't forget that ad exposure can benefit your company even without an immediate response in the form of a click.