DM University: CPC CPA CPM
CPC Definition
Abbreviation for Cost-Per-Click. CPC is the agreed upon cost charged to the advertiser by the site’s publisher each time a visitor clicks on the advertiser’s ad (link, banner, etc.).
Background Info
CPC is the amount you pay (if you’re the merchant and advertiser) or charge (if you’re the publisher or owner of the website) per click-thru of an advertisement. For example, if a website has a CPC rate of $.20 and provides 1000 click-thrus for an advertiser’s paid link, the advertiser would be charged $200 ($.20 x 1000). Leading search engines such as Google and Yahoo have reaped in huge profits by offering CPC-based advertising via their Adwords and Overture platforms, respectively. Many merchants prefer purchasing ads on a CPC basis because they only pay for actual visitors or click-thrus, as opposed to a figure based on impressions or how many visitors viewed their ads. It is important to note that while the CPC pricing model may be a suitable measure of direct response, it may not be an adequate measure of true actions taken by the visitor or user, given that it only accounts for clicks. For instance, a visitor can click on your banner that’s touting a new offer and be transferred to your website, but then do nothing to actually fulfill the offer once there. In other words, clicks do not necessarily translate into new business. The terms cost-per-click (CPC) and pay-per-click (PPC) may be used interchangeably or as distinct terms. When used as distinct terms, CPC indicates measurement of cost on a per-click basis for contracts not based on click-thrus, whereas PPC denotes payment based on click-thrus.
CPA Definition
Abbreviation for Cost-Per-Acquisition or Cost-Per-Sale. CPA is an advertising payment model by which the advertiser pays the publisher (of a website) each time a specific, visitor-initiated, and qualified action occurs, such as the completion of an offer or registration. CPA may also stand for an average dollar amount pertaining to the total cost in clicks it takes to convert a sale.
CPM Definition
Abbreviation for Cost-Per-1,000 impressions. The M in CPM is Latin for "one-thousand." CPM is an advertising payment model that charges advertiser based on the number of times an ad is viewed by a visitor, regardless of the visitor’s subsequent action. For example, a website that charges $10,000 per banner and guarantees 500,000 impressions has a CPM of $20 ($10,000 divided by 500). Virtually all offline advertising and most online banner or graphical advertising is sold on some type of CPM basis.
