Differences between CPM, CPC, CPL, CPA and CPI

Unlike advertising in traditional media in which the cost of an ad depends on the size, color and page it is included in, online advertising offers varied cost models tailored to the needs of each campaign.

In addition, a display ad is not the same, more similar in most cases to traditional advertising, than an ad in Adwords or in any of the social networks that allow brands to send messages to millionaire audiences upon payment of the established rate.

Therefore, digital advertising needs to incorporate another series of metrics that help define the different investments. In this post we show you the differences between CPM, CPC, CPL, CPA and CPI. Costs that vary depending on:

• The impressions of each advertisement that are shown to the visitors of the different web spaces.
• The clicks made on the links in the ads.
• The number of times a form is filled in and the call to action (CTA) button is pressed.
• The facilities of a program or app that are available.
• Other types of actions that are identified as conversions.

The 3 basic metrics of online advertising

In summary, all these indicators can be grouped around 3 fundamental metrics:

1.- Impressions

It is the most basic metric. Part of the number of users that visualize your ad, amount that establishes the necessary investment. And it is usually expressed in thousands. Which means that the cost is calculated according to each thousand impressions. This metric is usually the most numerous.

2.- Clicks

It is, perhaps, the fundamental metric. This is the number of times a link is clicked. Whether in newsletters or digital ads, a good click rate is often synonymous with success. Whenever this traffic is directed to the appropriate spaces.

3.- Conversions

A conversion can be any type of action that a company decides that is the one that interest them: a download, fill out a form with the user’s data or, even, a sale. The most logical thing is that, in the conversion funnel, this metric is the one with the least number. However, it is the most important.

Based on these 3 indicators, the main cost models of online advertising can be identified based on the user’s requested interaction:

1.- Cost per mille impressions (CPM)

The cost per impression is directly related to the number of times an ad is shown, which is known as impressions.

The metric that is most associated with this type of cost is the cost per mille (CPM) that indicates the value given to each 1000 impressions of the same banner. For example, if we give a value of 5 euros to the CPM of an ad and 30.000 impressions are produced, the cost per impression will rise up to 150 euros, the result of multiplying 5 by 30.

Generally, the cost per impression is used to increase brand awareness, branding. In fact, the main objective is usually the increase of the notoriety of the brand. For other types of objectives, CPM can result in too high an investment without clear results.

Digital CPM is more easily measurable

Cost per mille impressions is the cost model most similar to traditional advertising. As much in television as in radio or press the most normal thing is that the cost of the campaigns depends, essentially, of the amount of people who visualize it.

In the case of digital advertising, the advantage is that you can know exactly the number of users who see the ad. In contrast, in traditional advertising, measurement is usually not as accurate as it depends on audience measurement systems based on audience averages or analytical extrapolations.

This cost model is often used with display ads although it is also possible to run Google Adwords campaigns focused on CPM and not on the most common CPC.

2.- Cost per click (CPC)

The cost per click model, also known as pay-per-click (PPC), implies that you only pay for the number of clicks that are made on an ad. Which logically should lead to an appropriate landing page in which the conversion cycle is closed.

Although the best known system is Adwords, advertising in Google search, the cost-per-click model is also used in advertising banner campaigns. There are many platforms, in addition to Google Adwords that allow simple online contracting and “self service” for the purchase of clicks. Highlighted the Facebook and Instagram ad platform

The fundamental objective of the cost per click model is to capture traffic to our web spaces.

It is important to know the average CPC

The most normal thing is that an ad is seen by many more people than those who click on it. Therefore, the CPC is the payment model that is being imposed in the digital environment. Choosing the pay-per-click system at least you ensure that users reach your digital spaces. And you only pay for that traffic and not for those who have supposedly seen your ad.

That’s why it’s so important to master the CPC in Adwords or Facebook ad bids. A good cost optimization per click will help you save money. Therefore, depending on the country in which you bid, it is necessary that you know the average CPC. Only then can you adapt your investments.

In the graph above you have some basic indicators about the average CPC worldwide. Regarding Spain, the average CPC in search campaigns during 2015 varied according to the different autonomies:

However, the CPC does not only depend on the investment that will be made. For example, the Google Adwords auction does not only depend on the amount invested. The quality of the ads (quality score), which affects keywords, ads and landing pages equally, is a determining factor to achieve PPC campaigns with better prices and ads placed in better positions.

Therefore, in words of Joshua Novick, CEO of Antevenio, “optimizing your landings to get an improvement of 1 lead for every 7 clicks to 1 lead for every 6 clicks reduce your investment expense by 16.5%”. Some data that arise from the work that is done in Antevenio Go! to capture leads at a lower cost.

3.- Cost per Lead (CPL)

In this case, something else is required by the user. For example, register, complete a form, make a download or subscribe to a service.

In this price model, the conversion of a user into a lead is valued. That is, in a person who has given us more information, the previous step to becoming a client. It could be said that the user has gone from being a cold lead to a qualified lead.

To understand the Cost-per-lead model it is necessary to know that there is a lead nurturing process in which the following types of leads are identified:

1. Cold Lead: It’s the first step in which a user becomes lead. There has already been an initial contact with the brand. For example, a subscription or a download. However, these are users who are not yet predisposed to purchase. It is necessary that you convince them that you have something interesting for them. They are in what is known as Top of the Funnel (TOFU).
2. Qualified lead for marketing: There is already one more step. The user has shown a greater interest in your services. For example, these are users who read your emails or click on the links of your ads. They could become interesting clients but it is still necessary to work with them. They are located in the Middle of the Funnel (MOFU).
3. Qualified lead for sale (Hot Lead): This is the step before a lead becomes a customer. It is already ready for sale. To verify this, it is interesting to ask them to offer you more data in somewhat more complicated forms. The ideal is to pass these leads to the sales departments to try to convert them into customers. They are in the phase known as Bottom of the Funnel (BOFU).

CPL for lead nurturing campaigns

As you have seen, the cost per lead model is interesting to get a database of qualified contacts interested in our products or services with which we can interact afterwards.

In CPL campaigns, advertisers pay for an interested lead. Therefore, it is an appropriate model to build lists of powerful records. Or, even, to create member acquisition programs with lead nurturing strategies.

In the Coste por Lead campaigns it is the advertiser who sets the standard and chooses publishers or relevant media that can take users that go a step further. In fact, the CPL model is suitable if you want, to work with email or SMS marketing strategies or other types of loyalty programs later.

4.- Cost per action (CPA)

It consists of the cost that is paid for a sale made. Obviously it is the most interesting for advertisers since only one user is paid for each converted action, which is already considered a customer.

The cost-per-action model is widely used in ecommerce. With CPA it is possible to easily and quickly measure the number of transactions carried out thanks to online advertising.

The acquisition or sale is the example of final conversion that a brand seeks with a digital marketing campaign. Therefore, Cost per action is the ideal model to determine the return on investment (ROI) of any campaign.

In this case, it is easy to know not only what the campaign cost but also the number of sales that have been achieved. A simple division will mark whether there has been success or not. In fact, it is the clearest way to decide if the disbursement made has taken effect. If you manage to recover the amount of the investment.

CPA, the end of the conversion funnel

However, there is an important element that you should keep in mind in any evaluation of the effectiveness of Cost per action campaigns: the life cycle of a client. You cannot obtain adequate data if you don’t contemplate that the cost of acquiring clients should be divided among all the purchases that they will make throughout their lives as customers of your company.

The sale is considered the final conversion since it also represents the end of the conversion funnel. It isn’t possible to establish a subsequent agreement, since there is only the repeat purchase.

Therefore, the CPA campaigns focus on getting buyers at the right times. Therefore, the figures are usually much smaller. In addition, the CPA model is usually associated with a user tracking that is usually done by one of the following channels:

1. Tracking through cookies.
2. Coupons or promotional codes.

5.- Cost per install (CPI)

The abbreviation CPI is usually also used by another advertising contracting model, the cost per install. The payment for install refers to the variable payment for installation of a software, game or application (app) downloaded and installed on a computer, tablet or smartphone.

CPI or Cost per Install is a data that responds to the data of the investment made by a brand each time a user installs one of their applications. The metric estimates the necessary investment taking into account the following types of costs that influence the final price:

• Promotion cost.
• Development and maintenance of the application cost.
• The user’s cost of the application itself.
• The calculation shows a figure with which you know the amount of money that you need to invest every time you get a mobile application installation.

Advertising Services in Digital

Our company, Antevenio, offers the contracting of all the advertising models described here. If you want more information or want to request specific budget, do not hesitate to contact us (we will answer you very fast):

Information about Social Ads services on Facebook, Instagram, Twitter and Linkedin (CPC)

Information about advertising management in Google Adwords and search engines (CPC)

Information about lead capture campaigns (CPL)

Information about email marketing campaigns in quality database (CPL, CPC, CPM)