Saturday, July 21, 2007

Definition of CPM, CPC, CPA

CPM (Cost per 1,000), CPC (Cost per Click) and CPA (Cost per Action) are methods of calculating the charge for pages (advertisements) being served.

CPM is a holdover from traditional media advertising, and does not take advantage of the Hypertext nature of the medium. It charges purely on the number of times the advertisement is served.

It does account for branding effects, that are not accounted for in the other models. CPC is a cost associated with each click on the advertisement to the target page. CPA is a cost associated with each lead created from a click on the advertisement (CPL), or each sale (CPS).

Both CPC and CPA are much more accountable means of developing a price for the banner, and either are also used for affiliate programs. They become a variable cost in terms of generating the number of people exposed to the target page (this number is based on the CTR from the host vehicle), the number of leads generated (CPL) or the number of sales (CPS).

The downside for the vehicles is they do not control the design of the banner (poor design = low click-through etc.) and they are not rewarded for the branding effect of the banner.


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