There are a remarkable range of ways to buy mobile digital media these days, and each one has a set of initials that is used as shorthand for it. As brands explore their many options for reaching and engaging with consumers, it can be tough to remember which set of initials stands for which buying model. So we thought we’d publish a little glossary today, along with some ideas about how one can compare the relative advantages and disadvantages of each.
CPM stands for cost per thousand impressions (the M is the Roman numeral abbreviation for 1,000.) CPM is one of the most common ways of buying digital media. You essentially pay for every time your ad loads on a page or in an app. It’s a simple way to buy, but is coming under increasing scrutiny because the client is charged for the impression whether or not a consumer actually sees it. If, for example, the ad appears below the browser window and the user never scrolls down, the advertiser still pays. The industry is expected to move from CPM to cost per viewable impression (CPVI) standard over time as the industry works to address viewability issues.
CPC stands for cost per click advertising. Here the advertiser pays when a click is made on an ad. Some advertisers prefer to buy CPC versus CPM because they believe they only pay when someone is interested enough in the message to want more info. Some CPC programs are very effective, but there is a potential for fraud if a company deliberately uses bots or some other technique to drive clicks not initiated by a real, interested person. In mobile particularly there are some concerns about paying by the click because of the higher propensity for unintended clicks on small, touch screens. All that said, good CPC programs can be outstanding elements of a program. The key is knowing which CPC efforts are good at driving high quality clicks.
CPL is short for cost per lead, meaning that the advertiser pays when a lead form is completed and submitted. CPL is common in B2B marketing where it is unlikely that someone will make a purchase immediately. It’s also common in affiliate marketing. It can be an effective way to buy, though there is some risk of fraud if bots are programmed to fill in leads automatically. Therefore it’s important to understand both the quantity of leads and the quality of leads generated in a CPL program.
CPA or CPS
Cost per acquisition or cost per sale. Here the advertiser pays only if a purchase is made. This is a relatively low risk way to buy media because the advertiser only pays when revenue is driven. But many media companies won’t sell media this way because they must assume all of the risk in the ad buy. Ergo, scale can be a real issue in CPA buying. Many brands pursue all of the CPA opportunities that they can, but move beyond CPA when their revenue goals rise.
In mobile app marketing, CPI refers to media programs where the advertiser pays for every installed app. Lots of app marketing is purchased CPI, because it is a fast way to drive installs. But the quality of installs driven varies by media vendor. Some CPI vendors work hard to find users that will likely use an app. Others use incentives like giving a user free “gold” for a game in exchange for their downloading an app. The quality of those installs really varies based upon the extent to which the users are truly interested in the app. You need to dig deeper than just the CPI to understand the true value that these vendors are delivering.
A measure for video, CPCV stands for cost per completed video. It is a popular buying model for both PC- and mobile-based video adverting. The advertiser is charged each time a consumer watches the ad in full.
Which Model is Best?
There’s no easy answer. It depends upon your objectives, target audience, and what your media partners are willing to do for you. The most important thing is to have high quality, unbiased third-party-verified information about the results each vendor drives, whichever form of media buying they offer. You need to understand the revenue results of every effort, regardless of how you pay for it. You need to have a way to track the results of every vendor at driving your true KPI, be it purchases, revenue dollars, or some other metric. Only then can you truly determine the best media opportunities and partners for you and your business. For example, while CPA always sounds great to marketers, it’s possible that a CPM program could actually be more efficient at driving revenue per dollar invested. CPA means very low risk, but it does not necessarily mean best return on ad spend.