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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.


For example:

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

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