What Are CPM, CPC, CPA, CTR?

Written by publift2019

14 Sep, 2020

This article defines the acronyms CPM, CTR, CPA, and CPC, which are different ways of publishers measuring ad revenue performance and compares them to each other.

CPM: Cost Per Mile

CPM, as some of you know, is an acronym for cost per mile, meaning the cost per 1000 impressions (or how many times it is seen). This refers to how much it cost to have an ad published a thousand times on a website and is seen by users.

One thing to mention is that adsense reports this as RPM. This benefits the publishers because it means that if your website has high traffic, selling on a cpm model could be an easy way of monetizing your content.

The total cost paid in a cpm deal is calculated by multiplying the Total Impressions by the CPM rate & then dividing it by 1000. For example, one million impressions at cpm equal ,000 in gross revenue.

If you're confused about the difference between cpm and ecpm, check out our ecpm guide.

What is a good CPM?
Analyzing past performance data, benchmarking results against averages for your market and evaluating the impact of CPMs on your ROI can help you determine whether a CPM is a good or bad result.

A lower CPM is not always a positive indicator for an advertiser, as it may be an indication of poor quality traffic. For publishers, having a high CPM doesn’t translate with higher earnings, as some ad inventory may not be sold.

Why do CPMs change throughout the year?
The cost per thousand impressions fluctuates throughout the year. For example, you may be coming up to Christmas or Black Friday and you can expect an increase as advertisers start upping their spend to catch all the purchase-hungry consumers. But, apart from these events, what makes CPMs move up and down throughout the year and what can you do to predict (and maybe even mitigate) these changes?

When advertisers increase their ad spend coming up to major events, we see a corresponding increase in CPMs. But we also see regular drops and increases in CPMs throughout the year across all of our publishers which can be harder to pin on a corresponding event.

This year, the pandemic has seen falling CPMs across the display adverting market in the US as a whole since April, according to eMarketer's recent report. Simply put, the lower demand for ads combined with consumers having more time online increasing the supply of impressions has led to a drop in CPMs. Find out more about how CPMs have been affected during Covid-19 in our Covid-19 Q1 and Q2 updates this year.

The January Blues in CPM costs
Based on our data, publishers will find a major dip in cost per thousand impressions in the month of January - the “January blues”. This is because consumer spending and traffic is down post-Christmas. Agencies and advertisers will also be busy planning budget spend and making deals for the rest of the year so spending is reduced while those campaigns are waiting to go live. CPMs drop from their peak in Christmas to 51% of what they were.

CPC: Cost Per Click

CPC means Cost Per Click, and it's a method that websites can use to determine the average times an advertiser has clicked on the relevant ad. CPC is also a widely used metric that advertisers incorporate to manage campaign budgets & performance. 

So let's say your ad gets 2 clicks, one costing $0.40 and the other is $0.20, this totals $0.60.

You'd divide your $0.60 by 2 (your total number of clicks) to get an average CPC of $0.30.

CPA: Cost Per Acquisition

CPA is also a payment scheme like cpm and CPC; however, it differs in that advertisers only pay when the user completes the desired transaction, such as a purchase, download or free trial. Therefore the advertiser only pays when an acquisition is made, therefore, CPA is Cost Per Acquisition. However, this means that the publisher takes all the risk for running the ad as you will be paid based on conversions made instead of just clicks or impressions. This is often referred to as affiliate advertising & was a widely used model in the mid-2000s.

CTR: Click-Through Rate

So while cpm, CPC & CPA all indicate the cost of advertising online, CTR measures the efficiency. The CTR or Click Through Rate, is measuring the success of online ads by accumulating the percentage of people that actually click on the ad to arrive at the hyperlinked website. The percentage is found when we divide the number of users who clicked on the ad by the number of times the ad was delivered.

Is CPA better than CPC?

Rather than focusing on the click, whether the user converts after clicking on an ad becomes most important. While both CPA and CPC come into play for PPC campaigns, an advertiser will usually pick one over the other. If an advertiser has a great click through rate and consistent conversion history, they probably should go with CPA (which pays more per click but could earn more revenue). However, if an advertiser has not established a steady stream of conversions, still need to optimise for a quality PPC profile score or have a strict daily budget, opt for CPC.

Conclusion

So to recap…

cpm or Cost Per Mille measures is the cost of every 1000th ad impression made

CPC or Cost Per Click measures the average cost every time a user clicks on an advertisement.

CPA or Cost Per Acquisition is the cost every time a conversion is made

And finally, CTR or click-through rate measures the efficiency of clicks actually going through to the ads website.

Do you still have questions and want to see how you can further increase your ad revenue? Contact our team today.

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