CPM
CPM stands for Cost per thousand. (M is the Roman numeral for a thousand, hence cost per thousand).
This is the amount that you will pay to the ad network or website publisher to show your ad a thousand times on their website or across their entire ad network.
If your ad is shown only once to each visitor (unique impressions) or any number of times, it is something you will have to resolve with the nad network or the website.
CPM fees were once (before the 2000 bubble popping era) as much as $ 75, but have now dropped to as low as $ 1 CPM.
CPC
CPC stands for Cost Per Click. This is what you would pay the ad network or website each time a visitor clicks on your banner. CPC fees can be as high as $ 3 per click or as low as 5 cents per click. It depends on your product and your market, among other factors, the more competition there is, the higher you will likely end up paying when competing with the competition.
CPA
CPA stands for Cost Per Action. The Action could be any of the following types of actions: a visitor who clicks on your banner and lands on your site and completes a simple inquiry form (CPR – Cost per registration), or if the visitor makes a purchase (CPS – Cost per sale). ). It could be a flat fee or a percentage commission of the sale made. Affiliate networks like CommissionJunction, Linkshare, and Clickbank have very good software systems to track all of this and provide statistics to online merchants and publishers on their website network.
I have explained in detail what an Affiliate Network is, in another section. They basically allow publishers’ websites to sign up for free so they can start earning commissions on sales that come from traffic they send to online merchants. The Affiliate Network tracks all of this using their system and code publishers and merchants need to place it on their website. Publishers can sign up for free mostly, and in some cases, online merchants have to pay a one-time setup fee and possibly a monthly fee with commissions, for example. As in commissionjunction. A very popular site that is free for merchants is the Clickbank network.
CTR
CTR is the click-through rate. This is the percentage rate that people click on your banner ad. If your banner ad is seen by 100 people, but one person clicks on it, then your CTR is 1% or .01
Similarly, if your banner ad is viewed 100,000 times and in the same time period 2,000 times clicked, then your banner’s CTR is 2% or .02.
This is how we calculate the CTR …
(Number of clicks / Number of impressions) x 100
Example, for the previous case it would be –
(2000 / 100,000) x 100 = 0.02
CPM, CPC or CPA … which is better for my advertising campaign?
Your choice will depend on several factors. Sometimes companies like Pepsi just want to enforce their brand and be seen on many websites, without the need for the user to click on their banners. This is a brand hammering strategy and a CPM deal would be preferred.
Aside from the massive branding effort above, the decision to go for a CPC, CPM, or CPA ad becomes a calculated decision when you have a product that you want to sell on your website.
Would you pay the publisher only for the visits he sends you? Or would you pay him for every thousand ads he shows you? Or would you pay a commission on the sales of the visitors you send?
This is complicated. You may need to read the following paragraphs slowly, or even multiple times, to understand the gist of what I am saying …
To help you decide, you must first run a CPM pilot campaign that will help you measure results. Your CPM campaign and the number of clicks on your banner will let you know exactly what your CTR (click through rate) is for your banner.
Your CTR will help you decide the type of campaign: CPM or CPC? If your CTR is high you should go for a CPM, if it is low you should go for a CPC.
The reason for this is simple. If you have a low CTR then you would rather pay only for the low traffic coming to your site. If your CTR is high, then you don’t mind paying the CPM, because your cost will not increase for more and more visitors to your site, but it will remain the same.
I’ll explain the above, with a couple of examples:
Example 1
Let’s say a website that you want to advertise charges a CPM of $ 5.00 and a CPC of 50 cents.
And do you have to decide whether to go CPM or CPC?
Let’s say you first buy 1,000,000 impressions.
This equates to $ 5000 ($ 5 per 1000 impressions x 1000)
Suppose now that your CTR is not good and is 0.2% (or 2 clicks per 1000 ads)
Now, you need to calculate the amount you will pay if you bought a CPC.
If your CTR is 0.2% and it shows 1,000,000 ads, then this works for …
.002 x 1,000,000 = 2000 clicks.
So basically you have paid $ 5000 for 2000 clicks or $ 2.50 per click!
This means that I am better at buying based on CPC, because a click there costs me only 50 cents! And if I opt for CPC, I’ll get 10,000 clicks for $ 5000 … which is 5 times more than the clicks I get on the CPM model (2000).
Example 2
Let’s say your banner ad turns out to be very good and you get a very good CTR of say 5%
Now you must decide ..CPM or CPC.
Let’s analyze as above –
I paid $ 5000 for 1,000,000 ads with a 5% CTR
That means 5% x 1,000,000 ads were clicked, which equates to
= .05 (5%) x 1,000,000 = 50,000 clicks!
So for $ 5000 I got 50,000 clicks.
Now if I had bought per click, I will pay at the CPC rate of (50 cents)
50,000 x $ 0.50 for 50,000 clicks, which is $ 25,000 (5 times what you would pay with CPM for the same traffic)
So, it is better to buy with a CPM system for this banner ad campaign.
What about the CPA?
I have dedicated a separate chapter for this. This system is slowly gaining popularity. It seems to be the fairest of the three methods, especially when selling a product or service. Both Google and Yahoo are moving towards moving their CPC system to a fairer and more measurable CPA system. Google has recently launched Google Analytics and the Google version of PayPal (Google Checkout), which is a positive and firm step towards its CPA plans.
Selling Ad Space On Your Website: How Much Can You Charge?
Today, CPM rates have dropped from highs of $ 50 to $ 10 to $ 2 in many cases.
If you have a lot of traffic, you can approach the ad networks and they will serve the ads for your website. They will give you a code snippet to insert into your website pages. You will get a username and password to log into a dashboard area on the main ad networks website, to see how your site is performing. Ad networks pay you based on CPM or CPC, depending on what your customer (the advertiser) chooses. They will have a 40% to 60% commission. This is acceptable, considering the fact that they get you customers and revenue, and they have to manage all the ad technology and payment systems.
Most of these ad networks require you to have a certain number of impressions per month to qualify to be part of their website network. For example, DoubleClick requires a minimum of 5 million monthly page impressions. There are many medium-sized networks such as Advertising, fastclick, ValueClick (CPC only, partially owned by DoubleClick), and even smaller ad networks such as burstnet. You should visit adbalance for a complete list and summary of popular ad networks.
Banner management software
If you want to manage your own Clients and their banner ads for your website, you will need to develop an ad serving engine or license a third party engine and install it on your website. You can get a list of free and paid software scripts that you can install on your website from cgi-resources.com or hotscripts.com