CPM means Cost Per Thousand. (M is the Roman numeral for thousand – and so Cost Per Thousand).
This is the amount you will pay the ad-network or website publisher to show your ad a thousand times on their website or across their ad-network.
Whether your ad is shown only once to each visitor (Unique Impressions) or any number of times – is something that you will have to work out with the nad-network or the website.
CPC means Cost Per Click. This is how much you would pay the ad-network or website every time a visitor CPM Calculator clicks on your banner. CPC rates can be as high as $3 per click or as little as 5 cents per click. It depends on your product and your market – amongst other factors, the more competition there is – the higher you will probably end up paying as you compete with competitors.
CPA means Cost Per Action. The Action could be any of the following types of actions – A visitor clicking on your banner coming to your site and filling up a simple enquiry 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 in place to track all this and provide statistics to online merchants and publishers on their network of websites.
I have explained in detail what an Affiliate Network is, in another section. They basically, allow publisher websites to sign up for free so they can start earning commissions on sales arising out of the traffic they send to online merchants. The Affiliate Network tracks all this using their system and code merchants and publishers are required to place on their website. Publishers can sign up for free mostly, and in some cases online Merchants are required to pay a one time setup fee and possibly a monthly fee with commissions – eg. As in commissionjunction. A very popular site that is free to Merchants is Clickbank network.
CTR is Click Through Rate. This is the percentage rate at which people click on your ad banner. If your banner ad is seen by 100 people but clicked by one person – then it’s CTR is 1% or .01
Similarly, if your ad banner is seen 100,000 times and in the same time period it is clicked 2000 times – then your banner CTR is 2% or .02 .
This is how we calculate CTR …
(Number of Clicks / Number of impressions) x 100
Example, for above case it would be –
(2000 / 100,000) x 100 = .02
CPM, CPC or CPA … which is best for my ad campaign?
Your choice will depend on various factors. Sometimes companies such as Pepsi, would just like to enforce their brand and be seen across many websites, without any need for the user to click on their banners. This is a brand hammering strategy, and a CPM deal would be preferred.
Apart from the above mass branding effort, 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 for only visitors he sends you? or would you pay him for every thousand ads he displays for you?or would you pay him a commission on sales from visitors he sends you?
This is tricky. You may need to read the paragraphs below slowly, or even several times over to get the gist of what I am saying …
To help you decide, you should first run a pilot CPM campaign that will help you gauge results. Your CPM campaign and number of Clicks on your banner, will let you know exactly what your CTR (Click through Rate) is for your banner.