Are you running PPC advertising campaigns for your business? If not, you’re missing out on one of the most lucrative and scalable sources of customers on the web. From Adwords to Facebook Ads, PPC – in both display and search form – rules the world of direct response advertising.
In this guide, we’ll be answering one of the most common questions PPC advertisers have regarding their campaigns: “Should I use cost-per-click or cost-per-mille bidding to pay for my traffic?”
What is CPC and CPM?
When you start an advertising campaign on Adwords, Facebook Ads, or almost any other online ad network, you’ll be given a choice between two bidding options: CPC and CPM.
CPC stands for “cost per click.” It’s a form of bidding where you pay for clicks made by users on your advertisements. Since you only pay for clicks, an ad that gets little attention is unlikely to cost you very much, while a popular ad can be quite costly.
CPM stands for “cost per mille.” Mille is a Latin word that translates to “thousand” in English. Thus, CPM is a form of bidding where you pay per thousand views for your advertisement. Like CPC bidding, CPM has both advantages and disadvantages.
Adjusted CPC, CTR and eCPM
Before we discuss the best bidding choice for your campaign, it’s important to learn about two other metrics used in online advertising: Adjusted CPC and eCPM. It’s also important to know about CTR – clickthrough rate – another vital advertising metric.
Clickthrough rate is the total number of people that view your ad who click through to your landing page. It’s always expressed as a percent. Clickthrough rates vary an incredible amount from one campaign to another – anything from 0.1% to 5% could be thought of as a “good” clickthrough rate, depending on what you’re advertising.
When you’re bidding for traffic on a CPC basic, your clickthrough rate (CTR) plays a major role in determining your cost per click. This is because many ad networks use what’s known as eCPM – effective cost per mille – to determine how much you’ll pay for your traffic.
Your eCPM is your cost per click (CPC) multiplied by your clickthrough rate (CTR). A high CTR will result in a lower CPC, since most ad networks – such as Facebook Ads and Google Adwords – lower your eCPM to slightly above the next highest bidder.
Make sense? In a way, even when you bid using CPC pricing, you’ll still be paying per thousand views in the form of your eCPM. It’s worth noting that not all ad networks use this pricing model – some only offer CPM bidding, while others have a CPC price floor that makes eCPM a poor metric for determining ad performance.
When should you choose CPC bidding?
CPC bidding has several benefits for you as an advertiser. One of the biggest is that it can be significantly less risky than a CPM campaign. If your CPC ads fail to attract the attention you’d like and few people click through to your landing page , you won’t be charged very much your campaign.
This makes CPC a great option for experimenting with new advertising ideas and ad creatives. If a campaign generates very little clicks despite racking up thousands of impressions, you’ll be charged very little. Likewise, if your ad has a high conversion rate but low clickthrough rate, CPC bidding can minimize your advertising costs.
In general, you should choose CPC bidding when your ads are geared towards high conversion rates and low clickthrough rates. You should also bid CPC if you have a stable conversion rate from day to day, since it makes calculating your total profit and return on investment far more simple.
When should you choose CPM bidding?
Like CPC, CPM bidding has several benefits for advertisers. The biggest benefits of CPM bidding is that it lets you generate huge amounts of traffic at a low price with an eye-catching, interesting ad.
Because of this, you should generally switch from CPC to CPM bidding if your ad is generating a high clickthrough rate. Most ad networks have a minimum CPC; if you switch to CPM, you can generate traffic at an average cost-per-click below the price floor.
It’s important to remember that CPM bidding is a significantly more risky form of pricing, especially if your campaign has a large daily budget. If your clickthrough rate declines significantly due to overexposure or lack of user interest, you could end up paying for impressions that don’t generate any traffic for your website.
Selecting between CPC and CPM bidding
Every advertising network, from Adwords to Facebook Ads, has its subtleties. Some are built for CPC bidding – a reality that many Adwords search experts wish weren’t the case – while others are more lucrative for high-CTR, CPM-based campaigns.
Understanding when to switch from CPC bidding to CPM bidding can help you raise your return on investment from online advertising and generate more leads or sales at a lower cost. It can also help you expand the scale of your advertising campaign.
There are other forms of bidding that many ad network support, from CPA bidding (cost-per-acquisition) to daily, weekly, or monthly flat rates. These bidding options each have their own unique advantages and disadvantages for your campaigns.
For now, follow the golden rule of bidding and your campaigns will be a success: If your clickthrough rate is high, bid CPM and increase your traffic. If your clickthrough rate is low, bid CPC to optimize your return on investment and focus on conversions.
PPC advertising provides a great opportunity for your company to earn additional revenue that is unrelated to your core business activity. Call 949-229-3454 now and find out more about how Bliss Drive Digital Marketing Services can help you in designing an effective Pay Per Click campaign.