CPA (Cost per Action), CPC (Cost per Click), CPM (Cost per Thousand)

The terms CPA, CPC and CPM are used to express the metrics of Internet advertising. Essentially, CPA, CPC and CPM can be used to calculate the cost for advertisements.

CPM or Cost per Thousand

CPM, which means cost per thousand, is a leftover from the old days of print advertising. Publishing companies normally quote advertising expressed in CPM. For example, if a magazine has an estimated readership of 100,000 and an advert costs $1,000, then the CPM would be $10.

CPC or Cost per Click

CPC stands for cost per click. This is the cost of somebody clicking on an advertisement. Many of today’s search engines now operate on a pay per click basis. This means that they will display advertisements free of charge. However, advertisers then pay a specified amount each time somebody clicks on the advertisement. The cost per click (CPC) is normally determined by way of auction. Ads with a higher CPC cost per click will normally appear higher up on the ad list.

CPA or Cost per Action

The term CPA stands for cost per action. This is the cost for each lead that is generated from an advertisement.

Both CPC and CPA are much better measures for web metrics than CPM. The also have advantages for both the advertiser and the publisher. From the advertiser’s point of view, the risk is reduced because they only pay for results. If nobody clicks on the ad, then they don’t pay. On the other hand, charging on a CPC or CPA basis allows the publisher to maximise revenue. These type of advertisements are normally sold on an auction basis. This allows the publisher to charge the maximum amount that the market will bear.

CTR (Click-Through Rate)

CTR is another measure used to calculate the effectiveness of advertising. The CTR simply measures the number of clicks on an advertisement, such as a banner. For example, if 1,000 people click on a particular banner, then the CTR is said to be 1,000.