Online Advertising Terms: CPM, CPC, CPL, CPA
2018-06-08 ONE NET WIKI
As an Online Advertising Publisher, it’s important to understand how different online ad models — CPM, CPC, CPL, and CPA — can impact what you offer to advertisers, the revenue you can expect to generate, and the risk you take on.
1. CPM: Cost Per Mille
CPM means the cost of 1,000 advertisement impressions on a website.
The total price paid in a CPM model is calculated by multiplying the CPM rate by the number of CPM units.
For example, one million impressions at $10 CPM equals a $10,000 total price.
1,000,000 / 1,000 impressions = 1,000 units
1,000 units X $10 CPM = $10,000 total price
2. CPC: Cost Per Click
CPC means the cost or cost-equivalent paid per click-through.
The formula to calculate cost per click is the cost to the advertiser divided by the amount of clicks.
3. CTR: Click Through Rate
CTR is a measure of how effective a create is based upon how many people have clicked.
For example, consider a campaign where payment is based on impressions, not clicks. Impressions are sold for $10 CPM with a click-through rate (CTR) of 2%.
1000 impressions x 2% CTR = 20 click-throughs
$10 CPM / 20 click-throughs = $0.50 per click
4. CPL: Cost Per Lead
CPL means advertisers compensate you when someone views an ad on your site, clicks that ad, and then takes a further action to become a qualified lead for a sale. This might mean signing up for an e-newsletter, reward programs, or free website membership.
5. CPA: Cost Per Acquisition / Cost Per Action
Cost Per Acquisition means publishers only receive payment for completed sales (i.e. the e-newsletter subscriber goes on to purchase services from the advertiser.)
CPA is calculated by dividing cost by conversions, or dividing cost per click (CPC) by conversion rate.
If cost is $1,000 and there are 200 actions, CPA is calculated as:
CPA = $1000 / 200 actions = $5
If CPC is $1 and conversion rate is 10% (0.10), CPA is calculated as:
CPA = $1 / 0.10 actions = $10