One of the ongoing arguments in the world of affiliate marketing is the debate between CPC and CPM. They’re both payment methods you can use for your marketing campaigns, but the debate centers on what you get out of them.
CPC stands for Cost Per Click. Using the CPC model, you pay for clicks in your campaigns. If your CPC is $1, and 1,000 people see your ad but only two people click it, your cost will be $2.
CPM stands for Cost Per Mille (thousand), and with a CPM model, you pay for the number of times your ad is seen. There is no click component here. If your CPM is $5, that’s what you’ll pay for 1,000 impressions. If your ad gets 100 clicks or zero clicks, you’ll still only pay the $5 CPM.
From first looks, the CPC model would be the winner. After all, your marketing campaigns don’t make money from people seeing your ads. You make money from people clicking them and ending up on your offer page. Clicks are the end-goal, but clicks and impressions are peas in the same pod. Maybe not identical, but certainly connected. The difference is just in the mechanics of converting impressions to clicks.
Everything starts with an impression. After all, nobody can click an ad they haven’t seen, can they?
The fundamental difference between the two models boils down to the cost. You might be running campaigns with a CPC of $1. On the other hand, you might be running campaigns with a CPM of $5, which is $5 for one thousand impressions of your ad.
All you need is five clicks from the thousand impressions to match the CPC model’s effectiveness at this CPM rate. A click-through rate of 0.5% on your CPM campaign will bring you the same five clicks you would get from a CPC campaign.
If your click-through rate goes to 1%, then your one thousand impressions will get ten clicks for $5, half the CPC campaign cost.
On the other hand, if your click-through rate falls below 0.5%, you’ll end up paying more for your clicks over the CPC cost.
CPC is the more straightforward way to run campaigns. You know precisely what you’ll be paying for your clicks and how many clicks your campaigns will get. Take an advertising budget of $5,000 at $1 CPC, and you know you’ll get 5,000 clicks.
That same budget on a $5 CPM model will get you one million impressions. A 0.5% click-through will reach 5,000 clicks for the exact cost as the CPC model. Anything above that, and you’re paying less on the CPM model.
CPM ads are more involved. The whole model centers on the click-through rate. Get the click-through rates up, and CPM can be far more cost-effective than CPC campaigns. So how do you decide which model to use for your marketing campaigns?
The best answer here is always TESTING. Since the Cost Per Click model is a known quantity, the test’s goal is to see if you can get your campaigns below the CPC’s final cost.
Run a campaign on Cost Per Mille to see how many clicks that gets. Translate that into CPC, and you’ll know which model got the most clicks for the lowest amount of marketing budget.
The destination of the click will also play a part in your choice of advertising model. If your ad leads to an offer that converts particularly well, then you’ll be better off with the CPC model. Since the cost to get the clicks is known, you’ll be better off getting the largest number of clicks to your offer and let that do the job of making the conversions.
If your ad is powerful, but your offer page is so-so, CPM is the best model to use. Since your offer page isn’t converting that well, you need the maximum number of visits. A strong ad will get the highest click-through rate and the highest number of visits to your offer page.
Of course, the campaign model isn’t the only element you need to test. Creatives, images, devices, day-parting. Everything that can be tested should be tested. That’s marketing 101. Start your testing with a CPM campaign. You know how many clicks an equivalent CPC campaign would get, so you know what your CPM campaign has to beat.
Need some help getting started? Get in touch with one of our affiliate managers, and we’ll get your campaigns up and running.