Humans spend almost 50 percent of their time online, visiting websites, emails, social media, etc. With that, we are likely to see ads (image / text / video). Online ads mean generating profit through ad serving, on websites or social media.
There are two important ways that advertisers can use to drive traffic / visibility to their website, namely cost per click (CPC) and cost per impression (CPI). Let’s learn about them one by one with examples.
Cost per click (CPC)
Also called Pay Per Click (PPC), this is an effective online advertising method. Here, the advertiser pays money based on the number of clicks on the ad. You need to consider a few things before choosing this strategy, as clicks would mean an interaction between potential customers and your business. You are paying exactly for this, so you should consider:
How much are you paying?
The kind of attention you are looking for?
The value you are receiving?
The advertiser pays money to publishers based on a formula or bidding process. Publishers search for third-party matches to find advertisers such as Google AdWords or Microsoft Bing Ads. They hire these companies who in turn have complex algorithms to calculate what kind of traffic is coming from where. If the advertiser’s product matches the type of traffic, then Bingo, there is a match.
Once published, the ads will remain on the website for as long as the advertiser has bid to pay. For example, if a website’s CPC rate is INR 1, 100 clicks would mean INR 100 (1 x100). Depending on the offer, the advertiser must pay.
Cost per impression (CPI)
This is also known as Cost per thousand impressions (CPM), where M represents the Roman numeral 1000. This is the fee that an advertiser has agreed to pay for every thousand times the ad is viewed. Basically, every appearance of the ad to users counts as impressions. The price is established based on every 1000 visits. Only views matter here, not clicks.
Ad servers monitor impressions and adjust the view rate to match an advertiser’s spend. CPI’s pricing representation is similar to that of print ads.
For example, if a publisher charges INR 10 CPM, the advertiser has to pay INR 10 per thousand visits. Simple, isn’t it? Large websites typically use CPM to maintain stable visibility for their product. A publisher prefers this because they are paid only for views and not for clicks.
Which one to prefer?
Well, it largely depends on your sales. If the sales are good and the ad is not effective, then CPC is your friend. Clicks link you to potential customers / customers. But, if the ads are good but the sales are not that attractive, CPM would help to get some viewers and clicks (imagine 100 clicks per 1000 views). This could work very well, as the views could generate clients.
Therefore, CPC and CPM are two sides of the same coin. Both have promising and inconvenient results. It largely depends on your marketing plans. Also, optimizing ads based on performance would be great as it could change ad text, image parts, ad position, etc. These things have a strong effect on viewers.