CPA, CPC, CPV, CPM – what does it mean and how does it relate to your e-commerce?

The short introduction to major online advertising pricing models

Creating an online store is just the first step to high efficiency selling on the internet. The next is  online advertising – without SEM, social media advertising or Content Marketing it is hard to attract customers.Before you decide to use paid ads to reach potential customers in your target group, you should carefully choose the advertising pricing model.There are many pricing models and strategies depending on which advertising channel (Google AdWords, Facebook Ads, YouTube, GDN or others) you wish to choose. Your decision should depend on the type of campaign:

• Performance-based campaigns (i.e. the adverts aimed at clicks, likes, etc.) usually are settled in CPA, CPC, CPL and CPC models. Below you will find definitions of these terms.
• Image building campaign (i.e. adverts aimed at maximum market coverage) usually are settled in CMP or CPV models.

In both situations we take into account impressions, clicks or other actions performed by unique visitors, who are identified through cookies, therefore unfortunately we can’t be certain that they always coincide with real users’ behaviour - measuring the impact on real users is more complicated.Consequently, it is necessary to discern among all available pricing models to choose the best option based on your needs. Below we explain how major online advertising pricing models, like CPM, CPA, CPV or CPC, work and how to calculate those indicators.

The formulas used to calculate CPC, CPM and others indicators

CPA

CPA (i.e. cost per action) is a payment for a specific action performed by the user. The advertisers pay only in a situation when the user makes a conversion, e.g. clicks on an ad, submits a contact form or makes a reservation. Displaying the ads themselves costs nothing. Before the campaign starts we have to choose the conversion indicator.

How to calculate CPA?

e.g.

In effect, one conversion costs 25 PLN.

CPC

CPC (i.e. cost per click) is the next pricing model useful in the performance-based campaigns. CPC is based on clicks on sponsored links, whereas CPA charges the advertiser every time the user performs an action specified by the advertiser. Again, it does not matter how many times the ads are shown on the users’ screen.

How to calculate CPC?

e.g.In effect, one click made by one user cost 0,40 PLN

CPM

CPM (i.e. cost per mile) is a payment for one thousand advertisement impressions. In other words – it is a cost that you have to pay when your ad is shown one thousand times. This time the number of clicks is not relevant, we’re focusing on advertising visibility. You will pay each time an advertisement loads on a user's screen, therefore CPM model is most suitable for display and branding-oriented campaigns.

How to calculate CPM?

e.g.In effect, displaying one ad to one user costs 5 PLN.It is worth mentioning two related pricing models – vCMP and eCPM

• vCPM – this model also concentrates on ad impressions. An impression is recorded when at least 50% or more of the ad is loaded on a screen and it’s viewable for at least 1 second or longer (2 seconds in the case of video).
• eCPM – it is a mix of CMP and CPA or CPC. In this model both – impressions and clicks – matter.

CPV

CPV (i.e. cost per view) is a model popular among video advertisers. It’s calculated on the basis of views and has to be displayed to the user for its entire duration or at least a particular amount of time (e.g. 30 seconds).

How to calculate CPV?

e.g.In effect, each impression costs 0,50 PLN.

Other online advertising pricing models: CPL, CPS, FF

CPA, CPC, CPV, and CPM are the most popular pricing models, however they do not cover the full spectrum of possibilities. It is also worth to know some additional ones that might be useful in another types of campaigns:

• CPL (cost per lead) is a model similar to CPA or CPC, except here the main goal is to get data from the user (for example through a contact form).
• CPS (cost per sale) is a payment model depending on sales. The advertiser pays to the publisher an agreed upon percentage per transaction, so the payment is associated with sales.
• FF (flat fee) is a payment model based not on the number of clicks or impression, but the total time during which the ad is displayed, e.g. a week.

Product advertising efficiency

In PLA campaigns (Product Listing Ads) CPC is a typical solution. But showing an ad to users is not enough to gain customers – it has to be persuasive enough to generate clicks. What does it mean for PLA?The core of such an advertising is an up-to-date and well optimised product feed. If you plan to advertise some products, you have to ensure that the users always see their current prices, names, and photos. If the data in product feed is incomplete, you might encounter difficulties in performing an efficient campaign and gaining a large amount of clicks.With Feedink you can easily update and optimize your product feed, as well as adapt it to other publishing partners, like affiliate platforms or comparison shopping engines.With us, you will never have to optimize your feed manually when starting a new campaign. This saves you hours, which you can then spend on other marketing activities.