The two most popular online advertising charging models, cost per click (CPC) and cost per mille (CPM), both date back to the very early days of the internet. With CPC, you pay every time someone clicks on your ad to visit your site and with CPM, you pay every time your ad is displayed.
Despite CPC’s dominance, there are millions of specialist, niche websites offering CPM advertising through third-party ad agencies from as little as one tenth of a cent per impression. Although sites selling space at these rates are unlikely to appeal to luxury brands, there are tens of thousands of high-quality sites you can place ads on that attract audiences similar to the audiences you target.
In this article, we cover:
- Cost per click (CPC), its advantages and disadvantages and current CPC rates
- Cost per mille (CPM), its advantages and disadvantages and the opportunities CPM campaigns offer
- How to reduce the cost of each visitor to your site through CPM marketing and more targeted CPC campaigns
Cost per click (CPC) and rate cards
Cost per click first became popular following the launch of Google’s search advertising program 20 years ago.
This model excited advertisers for two reasons. First, you got visits from consumers when the products or services you sell are top of mind and they were motivated enough to search for information on them. Second, the audience was essentially self-selecting meaning a near zero level of advertising redundancy (paying to reach people who have no interest in what you’re selling).
CPC is the predominant advertising charging model. Other than on Google, CPC is used on social media networks and by supply-side platforms that sell ad space on exchanges on behalf of publishers (blogs, newspapers, trade magazines and so on).
Advantages and disadvantages of CPC
Advantages
- Known traffic costs. You decide which keywords you wish to compete for and how much you’re willing to pay for individual clicks.
- Transparency. You pay for visits only – Google and social media platforms don’t charge account or management fees.
- Manageability. You can set daily or campaign maximum spends to keep your spending within budget.
- Targeting. Demographic and intent targeting is particularly sophisticated meaning that you can choose your adverts to appear only to your desired audiences.
Disadvantages
- Less trusted than SEO. Despite CPC ads’ prominent position on search engines, organic (non-paid-for) websites get double the traffic and higher conversion rates.
- Does not build brand awareness. Whether to generate leads or sales, CPC advertising is results orientated and does little to raise target audience awareness of your brand and its history.
- Competition. There are no restrictions on competitors using your brand name in ad copy. Particularly sought-after keywords can cost so much per click that net profit after ad costs are negligible and you need to consider the campaign from a lifetime-value perspective.
- Click fraud. Competitors and other bad actors use web-bots to artificially inflate the number of clickthroughs to your site. Click fraud is difficult to detect and stop.
CPC rates in 2022
Although Google Search does factor in page relevance to how it ranks CPC advertisers, it and all other CPC platforms generally give prominence to ads placed by the highest bidders.
The excellent The Business Of Apps website has produced the following research showing the average cost per click per ad depending on platform and industry sector:
Cost per mille (CPM) and rate cards
Cost per mille describes the price per 1,000 ad displays. Brands buy CPM ads to promote themselves on blogs and in other online publications, often in the form of native advertising.
The CPM market is dominated by Google AdSense and fifteen other companies, generally the same supply-side platforms mentioned earlier that also sell CPC campaigns.
Each platform sells ad space for its own unique network of online bloggers and publishers. This makes booking ads on sites whose target audience matches your difficult own and many brands use programmatic advertising booking specialists like Croud Luxe to make the selections on their behalf.
CPM rates vary according to available inventory for space (one reason why native advertising is comparatively expensive) and the demographic characteristics of the audiences ads appear on.
As with CPC advertising, you can choose text, display, rich media and video advertising and select whether you want your content to show on big screens, tablets or phones.
Advantages and disadvantages of CPM
Advantages
- Cheap. CPC rates can be very low from as little as $1 per thousand impressions on platforms like Bidvertiser ranging up to around $15-20 on EMX.
- Increased organic traffic. The link between display ad campaigns and increasing branded searches is well established. Repeated exposure to your brand on websites your audience trusts is highly likely to generate a spike in organic traffic.
- Guaranteed exposure. Whereas CPC are focused on generating leads and revenue and attract a premium for it, CPM displays cost significantly less giving target audiences a chance to get to know you.
Disadvantages
- Hard to determine value. All website audience data is prone to a degree of error meaning that you may select websites to display ads on that are not capable of delivering quality or relevant traffic.
- Fraud. As there are click farms for CPC, webmasters (who are paid through your ads) can hire third-party companies to make traffic levels appear much higher. You may pay for 1,000 impressions but only be seen by a minority of human visitors.
- Lack of analytics. It’s much harder to measure the actions visitors take after clicking on an ad. Having little usable data on the performance of a site you advertise on makes it harder to argue for its initial or continued inclusion in a campaign.
Getting down the costs per visit
Even though they use CPC advertising, many companies use CPM modelling to determine whether they’re getting value for money from a campaign. For example, if your CPC ad costs you £5 per click and you get 20 clicks on average for every one thousand impressions, your effective CPM is £100 per mille.
Actual costs vary depending on what it is you are promoting but, according to TopDraw, the average CPM on Google search campaigns is $38.40, Google display campaigns £3.12, Facebook $8.60, Instagram $8.96, Twitter $6.46, and $5.26 for LinkedIn.
There are ways to bring down your effective CPM with CPC advertising with better targeting.
For example, Google’s:
- Custom Audience Affinity tool allows you to target by location, likely interests and which apps they use as well as customers who’ve visited your competitors’ websites.
- Custom Intent Audiences tool to display ads to visitors by which websites they’ve visited and their past keyword search history.
- In-Market allows you to target searchers looking for particular products and services when they’re at or close to the point of purchase.
Achieve high-yielding campaigns with low CPC/CPM with Croud Luxe
Luxury brands consider more than just return on investment when placing ads. It’s important that the sites and platforms you advertise on are consistent with your brand values.
This will inevitably reduce the number of sites you can run CPC campaigns on but, when you do find them, they can be highly effective in raising brand awareness among your target audience.
As well as CPM campaigns, new developments in CPC targeting mean that there are opportunities to reduce advertising costs by more precise targeting, essentially lowering your CPM on these campaigns.
Croud Luxe works with luxury manufacturers and service providers around the world. We’d appreciate the opportunity to discuss working with you on planning and executing your CPC and CPM campaigns to drive sales and build brand awareness. Get in touch via our contact form to speak to one of our digital consultants.
