Online stores need to promote themselves to get their products known, and as advertisers we have a wide range of online marketing advertising options. The latest platform to join is Instagram, which has offered advertising since October 1, although in Spain it is not yet available to all profiles.
That’s why we need to optimize our campaigns and, very importantly, understand which payment options platforms offer so we can make our ad spend profitable and reach our goals. Below we cover the most common payment models on today’s platforms, CPC, CPM, CPA, and some lesser-known ones that may also suit our goals, CPL, CPD and CPV.
Cost per click – CPC
With cost per click, as the name suggests, the advertiser pays each time a user “clicks” on an ad. It is one of the most widely used models because it brings users to our website or online store, although sometimes they are not high quality (clicks that convert).
It runs on a bidding system in which, generally, the more popular the ad or banner, the lower the cost compared to the initial price. But beware: it can also rise and become unprofitable for our campaign, so it usually requires monitoring to keep performance at optimal levels.
This payment model can be used in campaigns on the most common platforms, such as Facebook, Twitter, AdWords campaigns…
Cost per thousand impressions – CPM
Cost per thousand impressions is a payment model based on traditional advertising. The advertiser pays to appear, regardless of whether users click on the ad or whether it is profitable. It is widely used in branding campaigns that aim to reach as many people as possible to build brand awareness.
You pay for impressions delivered or can buy impression packages. Keep in mind that once the impressions run out, the ads stop showing.
It is the preferred method for high-reach platforms, since these campaigns generate fixed revenue, generally at high rates.
To find the CPC equivalent of a campaign’s CPM, use the following formula:
Equivalent CPC = CPM/(CTR*10)
It’s very easy to apply. For example, if we have a banner with a €10 CPM and a 0.25% CTR, the equivalent CPC would be:
Equivalent CPC = 10/ (0.25*10) = €4
As mentioned, rates tend to be high, so we want to keep an eye on the average cost per click to keep the campaign profitable.
Cost per acquisition or sale – CPA
With cost per acquisition, the advertiser pays a percentage when a conversion occurs through one of the ads. It is ideal for campaigns aimed at visibility and conversion. On most platforms you need to be a large account, due to the high percentage of guaranteed sales they require from advertisers.
It is generally used in affiliate marketing, although some platforms are starting to trust its results and open it up to smaller accounts.
Cost per lead – CPL
In this model, the advertiser pays based on sales opportunities prior to a possible sale: the lead. Impressions and clicks aren’t tracked, since you only pay for actions that add value, such as a sale, filling in a form or requesting a quote.
Like CPA, it is generally used in affiliate marketing.
Cost per day – CPD
With cost per day, you pay a fixed daily fee for an ad space. Examples include YouTube ads or TV commercials. The minimum investment is very high, making it unprofitable for many advertisers.
Cost per view – CPV
This model is used in video campaigns you can create in Google AdWords. You pay per view, meaning only when the user has watched more than 30 seconds of the ad, or the entire ad if it is shorter.
What kind of advertising does your business need?
As we can see, each payment model serves a different campaign goal. At Trilogi we help you choose the platforms and media that suit you best to create the advertising campaigns that best fit your online business.
