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Web Advertising Rates Cpm Homework

Cost Per Click vs Cost Per Impression

Recently I was reviewing some online advertising for some of my clients and I realized maybe I have been doing things inefficiently. In all of my campaigns I have been selecting the cost per click payment method but never really looked at the cost per impression method. In this article I review the advertising I have been doing on Google Adwords, Facebook Ads and Linkedin Ads to see if I have chosen the most efficient payment method or if going forward I should be selecting the cost per impression model. As an extra bonus at the end of the article I also include a free guide on the top 3 things that will improve your online advertising ROI and point #2 is something that no advertising agency will to you. Profitworks provides marketing services specializing in search engine optimization and website conversion optimization services. We Work. Your Profit. 

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What Is CPC And CPM Anyways?

Cost Per Click (CPC) - is an Internet advertising model used on websites, in which advertisers pay only when their ad is clicked, not each time an ad is shown.

Cost Per Impression (CPM) -  is an Internet advertising model used on websites, in which advertisers pay for the number of times an ad is show regardless of whether it is clicked on or not

For more marketing term definitions refer to my post Small Business Marketing Terms Dictionary. Below are the total amounts I have spent on Google Adwords, Facebook Ads and Linkedin Ads for my clients. Lets take a look at whether CPC or CPM is better for each.

 

Google Adwords

What is it? - Google Adwords allows to you place text ads within Google search results and image ads on websites that are part of their display network. See below for an example of an image ad and a text ad.

Advertising Method Used To Date = CPC

Total Spent = $323.83

Impressions = 174,751

Clicks = 204

Click Through Rate = 0.12%

Cost Per Impression Using A Cost Per Click Method = $1.85 per 1,000 impressions

Now lets talk a look at how many clicks and impressions I could have got for my clients if I would have used a CPM model assuming spending stays flat at $323.83. To do this I would have to change from search ads to all display ads as you can only go to a cost per impression model with google on their display network (website where you can advertise with image ads, not text ads). Below is an example of the two different kinds of advertisements.

Image AdText Ad

I have not been able to find much information on what an average CPM cost is on google adwords. On one forum one guy said he gets $4.00 per 1,000 impressions. If we were to use this assumption using a cost per impression model would look like this.

Total Spent = $323.83

Impressions = 80,957

Click Through Rate = 0.12% (assuming the same click through rate, because it would be all display ads the click through rate may be different)

Clicks = 97

Conclusion:

Without actually testing this I don't know that I can make a clear conclusion. I would hypothesis that the CPC method should be better based on the above but without testing I will never really know. The problem is I don't know what CPM rate I would pay, if the click through rate would go up or down and if I get a better customer conversion rate by using display ads then text ads. At the end of the day the real metric that matter is the customer acquisition cost, and without testing this I won't know which method has the better customer acquisition cost.  Going forward I am going to test this and see how a CPM method will perform.

 

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Facebook Ads

What is it? - Facebook ads are the ads that appear on the right hand side of every Facebook page. They usually appear below the section titled "People you may know"

Advertising Method Used To Date = CPC

Total Spent = $101.92

Impressions = 532,395

Clicks = 117

Click Through Rate = 0.022%

Cost Per Impression Using A Cost Per Click Method = $0.19 per 1,000 impressions

To look at the equivalent of what this would look like in a CPM method is much easier for Facebook. Facebook currently is suggesting that I pay between $0.37 and $0.60 per 1,000 impressions. Lets Assume I bid $0.50 and see what that looks like.

Total Spent = $101.92

Impressions = 203,840

Click Through Rate = 0.022% (assuming the same click through rate, as there is no reason to think that it would change)

Clicks = 45

Conclusion:

Even if I bid at $0.35, which is below the suggested price, I still get only about 290,000 impressions and 63 clicks, which is no where near the amount I received when using a cost per click payment method. It appears for Facebook, at least for my clients, that CPC is the better way to go.

 

Linkedin Ads

What is it? - These are the three little ads that appear on every Linkedin page right below the section titled "People you man know". They are located on the right hand side of the screen and are under the title "Ads by Linkedin Members".

Advertising Method Used To Date = CPC

Total Spent = $170.65

Impressions = 200,156

Clicks = 19

Click Through Rate = 0.009%

Cost Per Impression Using A Cost Per Click Method = $0.85 per 1,000 impressions

As with Facebook, Linkedin provides an estimate of what should be paid if you choose the CPM purchasing model. They are currently recommending that I bid $2.06 to $2.12 per 1,000 impressions. Lets assume I bid $2.10. Below is what that would look like.

Total Spent = $170.65

Impressions = 81,262

Click Through Rate = 0.022% (assuming the same click through rate, as there is no reason to think that it would change)

Clicks = 8

Conclusion:

For Linkedin it appears it is also most beneficial to advertise using a cost per click method. Even at the minimum bid allowed, which is $2.00, using a cost per impression setup does not get you anywhere near as many impressions or clicks. I am definitely going to be sticking with the cost per click payment method on Linkedin going forward.

 

Summary:

It looks like in most cases using a cost per click payment model is the most beneficial for businesses looking to advertise online. The one exception where it is not clear is Google Adwords, which I will need to test to see the results. Watch for the results in future blog posts as I will post them after my test is done. This is a good exercise to go through for your campaigns as well. You will most likely get the same results, but it does not hurt to double check. If there is a way you can reduce the amount of money you pay and get more in return that is always a good thing. Plus, I think Google, Facebook and Linkedin probably already get paid enough so any savings you can find you should take advantage of. The one thing to keep in mind is that these sites are constantly changing, both in terms of how the ads are served and the prices. Given they change so rapidly this conclusion may change in a year or two years time. For right now though, cost per click is the clear winner.

Need a tool to see what companies are visiting your website? Read about some options by clicking here. 

To get our free guide on the top 3 things that will improve your online advertising ROI - Click Here

 

Other Related Article You Might Be Interested In

1. Why SEO Gets A Better ROI Than Google Adwords

2. The Difference Between Organic vs Paid Search

3. ROI of SEO vs PPC - The Compounding Power Of SEO

4. Are Ads On Google Adwords Profitable

 

Profitworks provides marketing services specializing in search engine optimization and website conversion optimization services. We Work. Your Profit.

 

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I hope this article on cost per click vs cost per impression was a interesting and helpful. Thanks for reading.

 

By Scott Bateman

Stored in: Online Advertising and tagged: Advertising Rates, Banners, Sales Tactics

Online advertising rates are set through a combination of ad size, ad location, ad performance and market demand.

Optimizing this key ad sales tactic results in higher revenue, increased advertiser acquisition and increased advertiser retention.

These results in turn influence the price on the online rate card.

Ad Size and Dimensions

The size of the ad is a major factor in Website advertising rates because of the amount of space each one takes up on a page.

Just as broadcast sells time and print sells space, online sells pixels.

Here are the total pixels for the three Internet Advertising Bureau sizes that dominate the universal ad package for online display advertising:

  • 728 x 90 – 65,520 pixels
  • 300 x 250 – 75,000 pixels or 14 percent larger than the 728
  • 160 x 600 – 96,000 pixels or 28 percent larger than the 300 and 47 percent larger than the 728

Based strictly on space alone, the 160 x 600 skyscraper should command the highest premium on the rate card, followed by the 300 x 250 and then the 728 x 90.

Dimensions via the ratio of height to width matter because they impact the creative. As a result, the 300 x 250 often gets the best rate and highest demand because it works better for creative, despite the larger size of the 160 x 600.

In the last few years, the 300 x 600 has become more popular. It has the width of a 300 x 250 and the depth of a 160 x 600. At 180,000 pixels, it is 140 percent larger than the 300 x 250 and 96 percent larger than the 160 x 600.

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Ad Location

Ads located above the scroll perform best. Whether they also work best on the left, in the center or on the right depends in part on what else the page contains.

However, a leaderboard (728 x 90) does not perform well above the site logo. It usually performs better to the right of the logo and even better below it.

Although the skyscraper is the largest size, what is known as the pillow or rectangle — the 300 x 250 — often is seen as having a strong clickthrough rate and location when it is placed within the body of an article and the article wraps around it.

The concept of viewability — ad positions that are viewable at the top of the page without scrolling — has become more important in online advertising.

Ad Performance

Size, location and the quality of the ad contribue to ad performance — in other words, the clicks.

Performance increases with targeting as well. An ad about job openings for nurses will perform well in an employment section for nurses.

But that same ad is likely to perform less well if it runs in other employment sections.

Therefore, the ad might command a premium on price in the most targeted section and a discount in other sections of a site.

Response should not depend on clicks alone. An ad with a phone number in it can result in a response via a phone call rather than a click.

In-store traffic because of a coupon ad, an ad about a sale or simple brand awareness is an invaluable form of indirect response.

Market Demand

The perception of better performance and location leads to higher market demand. For many sites, that higher demands results in a premium on the online ad rate.

A publisher will find that setting a rate card at a level low enough to sell out the bulk of the inventory will increase retention for advertisers and drive up rates in the long run.

Content sites will find that a careful balancing of the above four factors will drive higher sellout rates and advertising market share.

Guaranteed Impressions

A client might pay a fix rated for every 1,000 impressions, but that same client may or may not have a guarantee on the number of impressions.

For that reason, guaranteed impressions have greater value than non-guaranteed.

It may seem obvious that clients are guaranteed them, but whether or not to do so creates an opportunity in sales.

The simplest and most well-known example of non-guaranteed impressions is the use of remnant advertising networks such as Google AdSense, which allows a site to generate revenue from unsold inventory.

A good sales team should try to sell some of that inventory on their own as non-guaranteed impressions at a rate somewhere between what they get from national remnant networks and what they get from guaranteed impressions on the rate card.

The client then pays a variable amount each month based on the number of impressions delivered.

Unit CPM Rates

CPM is cost per thousand impressions. A review of 13 online newspaper rate cards showed the following average run-of-site (ROS), open-contract rates for the three major banner positions:

  • 728 x 90: $14.88
  • 300 x 250: $16.12
  • 160 x 600: $15.25

Pixabay Creative Commons license

Most of the 13 newspapers charged a similar rate for each position. Most major media sites charge at least a $10 CPM and some go as high as $25-30. But those rates are declining as competition increases.

The Chicago Tribune has an automated service that charges only $10 per thousand for geo targeted ads in 2017.

The U.S. News and World Report online rate card for 2017 charges a $25 CPM for run of section and $30 to $50 for high-value subsections. Interstitials command another $15 on top of the base rate. Targeting gets another $5 more.

The highly targeted Advertising Age has run-of-site CPM rates at $68, targeted sections at $68 and tagging at $90.

Targeted advertising commands a higher rate. Discounts are often available for high-volume and long-term contracts. Sites typically with the highest rates also have the steepest discounts and vice versa.

But it’s worth noting that CPM and CPC rates are declining over time as the total number of Web sites and pages is increasing faster than the amount of online advertising.

One answer to that problem: Drive up ad inventory volume by increasing site audience, unique visitors, visits and page views. Take market share from competitors.

Page CPM Rates

The average CPM rate for a page is an effective tool for an online business to measure how efficiently a Web site is performing for both revenue and audience.

Anyone who uses Google AdSense to generate extra site revenue will recognize this metric in their account reports.

To arrive at page CPM, divide total site revenue by total site page views. Then multiply the result by 1,000. The formula is simple:

Total site revenue / total site page views * 1,000 = Page CPM

A few more realistic examples will make the usefulness clear.

  • Example A — Assume a medium-sized site has $5,000 in revenue and 500,000 page views in a month. The average page CPM for the site is $10 using the formula of $5,000 / 500,000 * 1,000.
  • Example B — Assume a small site has $1,000 in revenue and 50,000 page views a month. The average page CPM is $20.

 

This rate card for a travel publication shows high CPMs because of its targeted audience with high income demographics.

What is a good page CPM?

I did two studies for clients that revealed average page CPMs of about $12 for a group of small, underdeveloped sites and CPMs ranging from $30 to $40 for another group of large and advanced sites that also had multiple revenue-generating products such as classifieds, directories, mobile and video.

A $12 CPM is too low for the underdeveloped sites to make a profit, while the larger sites have CPMs more in line with their true potential.

“Some major national sites I analyzed have a page CPM of nearly $100, but they also have high marketing and production costs.”

Some major national sites I analyzed have a page CPM of nearly $100, but they also have high marketing and production costs and targeting of high-value audiences.

A page CPM can be both too low and too high. A CPM that is too high can mean that a site is running the risk of selling out all available ad inventory and must focus more attention on boosting site traffic. It has pushed out low-CPM inventory. Good news can be a mixed blessing.

Although there is no perfect number, page CPM is a useful metric in striking a balance between revenue and audience performance.

If average CPMs are declining, one way to make up the difference is by increasing volume of impressions, usually by taking audience market share away from other sites in an environment where online audience growth rates are slowing.

CPC Rates

An advertiser who uses Google AdWords, Facebook, Bing or other major advertising sites will instead likely pay based on a cost per click or CPC.

A CPC rate card is fair to an advertiser based strictly on response rates, but it is unfair to the publisher if a great deal of inventory is used for a poor ad that generates no response.

As a result, a CPC campaign can have a wildly unpredictable cost and benefit.

It becomes even more unpredictable based on the category — auto, real estate and employment have a high CPC for advertisers because of intense competition for inventory and because a $4 CPC for real estate could result in a $20,000 commission for a Realtor and broker.

So a CPM campaign should be judged based on impressions with an emphasis on branding and response. A CPC campaign should be judged based on conversion rates.

Impact of CPC on CPM

Some studies are showing that cost per click advertising is driving down CPMs.

In fact, some buyers of search engine advertising are finding that when CPC is calculated on a CPM basis, the rate is closer to $2 to $3.

CPC delivers superior performance at lower rates if done right. As a result, the advertiser benefits, but the publisher often does not.

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