Why CPM Is Nearly Immeasurable For Performance Advertisers

November 13, 2020

Why CPM Is Nearly Immeasurable For Performance Advertisers

CPM and CPC are two sides of the same general advertising coin. They’re both payment schemes relating to how you spend your money and what you get for it.

CPC is cost-per-click. You pay for clicks; ads shown to people who don’t click are free. CPM is cost per thousands (‘Mille’ is thousand in Latin). The thousands refer to impressions. Showing your ad to someone costs you money, regardless of whether or not they click.

So which method is better? It depends upon what you want to achieve and what follows afterward. If your sales funnel is especially effective, and you need to test a variety of creatives, CPC is definitely the way to go. The “guaranteed clicks” put people into your funnel, and the funnel does the work of converting those people to customers.

CPM Is Nearly Immeasurable. Plain and Simple.

For a digital marketing agency or an advertiser looking to get leads or sell a product,

CPM’s or Cost Per Thousand Impressions is simply not a measurement that should exist.

Impressions on display ads are akin to eyes seeing a billboard on the street. The billboard may look great – but try measuring your sales based on the people that have seen that specific billboard. It’s damn near impossible.

In digital, finding impressions is easy; they are everywhere you look (literally). Still, impressions aren’t action – impressions aren’t connections to customers.

Want more impressions? Just find a busier street.

Clicks. Calls. Likes. Comments. Shares. Leads. Sales. These are actionable metrics that produce value. Actionable metrics are what digital marketing should be measured by and charged by. CPM and CPC are distinct models for digital advertising that can make or break a campaign.

Let’s understand the difference between the two in more detail.

Cost Per Thousand (CPM)

Advertising Cost x Number of Impressions/1000 = CPM

It’s how you measure the number of people who see your ad. For example, a $2 CPM means that it costs $2 to put your ad in front of 1000 people.

CPM is designed to build brand awareness. Brand awareness is good, but the main downside to CPM is that you may not get a single click from your ad. The problem is that you pay full price for the campaign, regardless of performance. Often, you pay for impressions that no one sees.

CPM is best used for driving awareness and brand engagement. For the biggest brands in the world like Nike, Apple, Coca-Cola, CPM builds brand visibility and keeps their products at the top of mind. However, most performance advertisers need leads, SALES, and actionable metrics that produce value rather than awareness.

Why Savvy Advertisers Trust CPC

Advertising Cost / Ads Clicked = CPC

Cost per click (CPC), also known as pay per click (PPC), measures the … cost per click.

That’s pretty self-explanatory. You only pay when a user clicks your ad. You don’t pay for people to view your ad like you would with CPM.

CPC is best used to drive conversions, whether these are website visits or sales.

When the visitor clicks on the ad, they’re taken directly to your site. And you pay for the cost of that click. If a sale occurs, then your tiny investment will have been a valuable one.

CPC Offers Full Transparency

Anyone who clicks is interested in what your ad has for sale. Therefore, you get full transparency when someone clicks on your adand you’re only paying for that click – which equals performance.

An agency partner that charges on a CPC pricing structure will eat the cost of any ad that isn’t clicked on. Hence, the risk is on the agency partner and not the advertiser.

There are fewer impressions with CPC, but the ads are a lot more tailored and targeted; plus, you only pay when users click on those ads.

At its core, CPC provides insight into the effectiveness of your ads.

Then Why Do Agencies Use CPM?

As we mentioned earlier, CPM makes the most sense for a campaign focused on heightening brand awareness or delivering a specific message. In this case, the click-through rate (“CTR”) matters less since the exposure from having an ad prominently placed on a high-traffic website helps promote a company’s brand name or message, even if visitors do not click on the ad. As you can guess – we are not big fans of this model – unless of course, you have an unlimited budget and are one of the larger brands in the world.

CPM is good for brand awareness… not so good for leads or sales

CPC – The Clear Winner for Conversions!

If you’re looking for conversions or acquisitions, CPC is your best bet. With CPC, you only pay when your ad is clicked, meaning it’s best to invest in ads that attract viewers.

A skilled partner in the native advertising space – such as Tapstone – leverages creative and publishers so that the right message is delivered to the right audience at the right time. When these elements are fully optimized, your CPC campaign can drive results that are far more measurable – and effective – than CPM. You pay when shoppers engage with your campaigns, and, as a result, you maximize your ROI.