CPC vs. CPM: Which
delivers better ROI?
In this corner of the ring is cost-per-thousand, the
oldest advertising pricing model. And in the far
corner, the opponent: cost-per-click. They’re
slinging it out in the battle of the advertising
pricing models. Who’s the champ?
The battle of CPC versus CPM has come to the
forefront now that online advertising is reaching
Which is better: CPC or CPM? It’s the question that
marketers have been asking since the beginning of
the online advertising age.
Mathematically, it’s easy to compare CPC to CPM.
Here’s an example of how to do it:
(CPC means Cost per Click ads, while CPM means
Cost-Per-Thousand Impressions of the ad.)
Assume that you bid $1.00/click for your CPC ad and
commit to a $2,500 budget. You are guaranteed 2,500
clicks. Now assume that you agree to pay a $15 /cpm
for the same ad and commit to the same $2,500
budget. You are guaranteed that your ad will be seen
166,667 times. To get the same number of clicks,
1.49% of the people who see the ad would have to
click on it (that’s click through rate, or CTR).
Mathematically comparing the cost of CPC to CPM is
simple. Knowing which produces results that drive
sales…that is the hard part. Many pontificate, but
few reach full knowledge and understanding.
Calling for proof, marketers want studies to gauge
the effectiveness of online advertising. But what
exactly are they measuring the effectiveness of?
Consider these questions:
• How does your B2B firm sell? And what do
you sell? A $2,500 widget or a $25,000 CRM
• Is it likely that your product will be
purchased online (think shopping cart
functionality)…or is yours a longer sales
process (think months)?
• Do you have a direct sales force? What do they
do with leads once they have them?
• What is the process for tracking those leads
once they are delivered to a rep?
As you can see, the definition of “effectiveness”
changes based on your company’s specific goals
In determining which pricing model is best, CPC
proponents will say that you can’t always trust
impression counts in CPM. But shouldn’t they be just
as concerned about click fraud in CPC?
Then comes the question of which leads are more
qualified. Cost-per-click might get more eyeballs,
but cost-per-thousand might guarantee those eyeballs
So who wins the big fight? CPC or CPM? Looks like
this one’s going into extra rounds.
---Source: Media Brains Business Blog
October 2008 (www.mediabrains.com).