In today’s competitive broadcast world, online advertisers are constantly looking for new techniques to advertise their products and services, obtain quality traffic and improve their visibility, increase conversions, and create action that generates revenue.
In an online advertising platform, there are various pricing models available. The most effective being the Cost per Click (CPC) and Cost per thousand impressions (CPM). More recently, Cost per Action (CPA) stepped in to the ring. However, CPA is still in its infancy.
Understanding the key differences between the PPC vs CPM can help potential advertisers decide which method will work best for their needs so they can structure their ad campaign accordingly.
So, what exactly is the difference?
Pay per Click (PPC)
PPC means that the advertiser pays the publisher each time one of their ads is clicked. In other words, the advertiser pay if a person clicks on a search engine result, link, or banner and lands on your site. The cost can be between .10 and 10.00 bucks per click depending on the market competition.
Normally, PPC is used for most small businesses that want the customer to take immediate action. Traffic Estimators and Keyword Research are important in deciding which keywords to build your ad campaign on. They will also help you decide on what you should pay for each click.
The basis of PPC advertising is built on keyword selection. Online advertising industry revolves around choosing the correct keywords and search terms. Well managed PPC advertising will generate traffic that achieves your desired outcome. This could be either to publicize an event or sell products and services.
In short, if your product or service appeals to a smaller but enthusiastic niche; if you are looking to increase leads and revenue before popularity and market domination; then, PPC may be a better choice for you.
One of the biggest advantages of utilizing pay per click (PPC) is that you only pay for visitors sent to your site from the publisher’s site. This means that you are only paying for those clicks that should result in some form of interest, revenue or buzz for your business.
Additionally, a PPC campaign lets you determine exactly who comes to your website. This will enable you target your ad to only those visitors who are interested in your product. If, for instance, you haven't started with much promotion on your site, using PPC is an ideal way to do so. It's also great for testing the conversion rate of your advertisements.
Another benefit of PPC advertising is that you don't need to make any changes in your website or tweak your web page in order to get high rankings in major search engines.
The major downside of PPC advertising option is the bidding war. The position (in search engine results) of your website will automatically move to a lower position should someone bid a higher amount than you. This is one reason why most people still consider PPC as the expensive marketing strategy.
So again, it becomes considerably challenging to compete particularly if you are using competitive keywords or key phrases. You may end up losing a lot of money if you don't play your cards right.
Cost per Thousand Impression (CPM)
Now unlike PPC, Cost per Thousand Impression (CPM) is an online advertising model, in which advertisers pay for the number of times an ad is shown regardless of whether it is clicked on or not. The person only sees your link, but does not click through.
In other words, you pay a given fee for every 1000 times your ad is displayed online (regardless of whether it’s clicked or not).
Now, CPM is primarily used in two situations:
First, you can do something called branding. Branding involves displaying your ad, not specifically for anybody to click on, but to raise awareness of your business or brand. This is why CPM is largely recommended for large nationally known companies. It helps them remind their audience that they are still there for them.
CPM is probably the best way for some, because such ads are getting the highest exposure possible. Facebook, in particular, is great for this. It is possible to typically get about 40,000 impressions for about $15 bucks. That’s approximately 38 cents for any ad displaying 1,000 times. Pretty cheap, isn’t it?
Second, CPM can be used once the PPC campaign has been fully optimized and you’ve acquired a high CTR (click through ratio or percent of clicks against impressions). You’ll realize that with time, as your CTR rises, you’ll probably be paying less per impressions.
From an advertiser's point of view the most apparent advantage with a CPM based advertising model is that the publisher makes money for every advert served, regardless of whether or not it generates a click, lead, or other action. This is great for publishers who do not have targeted keyword-based traffic. Besides, CPM can be placed anywhere. And again, there is no risk involved and the publisher can accurately estimate his income from the amount of traffic his website has. To sell CPM based ads one only needs traffic, since it does not require the reader to click on the ads.
The most noticeable flip side of CPM, of course is that a poorly placed or designed advert can end up costing a company a lot of money without any tangible results. Worse still, your ad is likely to be displayed to the same person multiple times – maybe 3-5 times in a targeted campaign over the course of one week through a platform like Twitter or Facebook, and you are billed for each instance it is displayed.
At the end of the day, it is easy to understand that though PPC vs CPM ad models may not perform well for every publisher, both of them are viable advertising options. As much as PPC proponents argue that you can’t trust impression counts in CPM, they ought to be equally worried about the click-fraud in PPC.
So, whichever option you settle on, your campaigns should be designed to cost-effectively reach the most members of a target segment and still generate the highest returns on investment as possible. But, it is also important that you do a little bit of testing before you finally decide on your advertising model from these two.