What are CPM, CPC, CPL, CPA, CPS, and CPI media buying models?
Digital marketing has its own language. Or, rather, it’s very own galaxy of acronyms. To a new digital marketer, they can be bewildering. Even experienced mobile marketers often have to turn to Google and re-check a seldom-used acronym.
And then, of course, you shake your head and wonder how you forgot it.
In the interests of being helpful for both experts and newbies, here’s a few terms you’ll encounter.
CPM: cost per thousand
Before you ask: yes, it is odd that CPM translates to “cost per thousand” but has an “M” and not a “T.” That’s because, just to make it a little more challenging, marketing experts have thrown a little old, dead, mostly forgotten language in for your pleasure (or perhaps theirs).
Yes, we’re talking about Latin.
CPM is short 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 webpage or in an app. It’s a simple way to buy, but over the past decade it’s come under increasing scrutiny because the client is charged for the impression whether or not a consumer actually sees it.
On the web, for example, if the ad appears below the browser window and the user never scrolls down, the advertiser still pays. On mobile, the same is true. This can be vulnerable to fraud, with a typical scenario being a fraudster loading up 5, 10, or 15 ads in the same space, stacked over top of each other.
CPM has traditionally been used for brand campaigns, not performance campaigns, because it’s a pre-action metric: no conversions involved. Ultimately, however marketers are so used to it they’ll often back out a cost-per-click (CPC) or a cost-per-action (CPA) or a cost-per-lead (CPL) to an estimated CPM.
CPC: cost per click
CPC is probably the simplest media buying model to understand. And thankfully, there’s no Latin involved.
CPC is cost per click advertising. Here the advertiser (that’s you) 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. And that’s likely true. 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 person.
Which is why, as you get deeper and deeper into media buying models that involve measurable metrics, you need fraud prevention solutions to ensure you’re getting what you pay for.
CPL: cost per lead
This is not a common model for mobile marketers or even consumer-focused marketers.
CPL means cost per lead. You as an advertiser pay a publisher or an affiliate 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 can be a very effective way to buy, though there is some risk of fraud if bots are programmed to fill in leads automatically.
That’s a little harder to do, however, than to fire off fake clicks.
CPA or CPS: cost per action, cost per acquisition, or cost per sale
OK, we’re verging into the little-bit-odd section of the marketing analytics verbiage again. CPA is often cost-per-action in the mobile marketing world, which means you pay for certain actions taken by a user in your app, such as registering for an account or making their first purchase.
Whether it’s action, acquisition, or sale, however, the point is that advertisers only pay if something happens. That’s why CPA is a relatively low-risk way to buy media because the advertiser only pays when a user takes definable steps, or when you recognize revenue. (Of course, there are ways for this to be gamed by fraudsters as well.)
Many media companies won’t sell media this way because they assume all the risk in the ad buy. If no one buys, they make no money. High-quality publishers with valuable inventory are more likely to want guaranteed revenue. But some can be enticed into CPA contracts if the value is high enough … and if they trust their inventory sufficiently.
CPI: cost per install
CPI is an extremely common way to price mobile app install campaigns, and even if marketers use a different model, they’ll often work out an effective CPI.
In mobile app marketing, CPI refers to media programs where the advertiser pays for every installed app. Lots of app marketing is purchased via CPI, because it is a fast way to drive installs. But, as in anything else, the quality of installs driven varies by media vendor. Some CPI vendors are extremely reputable, and work hard to find users that will likely use an app. Others use incentives in one app to get a user to install another app. Those “incentivized installs” can be low quality, although there are ways with playable ads to increase the quality.
As always, fraud is an issue as well: some fraudsters use bots to drive CPI campaigns and collect revenue. There are even still some physical install farms, where people manually install apps on hundreds or thousands of devices. Most of those are now entirely virtual, however.
The million-dollar question: which model is best?
The easy answer is that there’s no easy answer.
And there’s some truth to that. It really does depend upon your objectives, target, and what your media partners are willing to do for you. The most critical thing is to have high quality, unbiased third-party-verified information about the results each partner drives, whichever form of media buying you choose.
As previously mentioned, most advertising vendors reverse engineer a CPM from whatever buying model you choose. If, for example, your campaign is good at driving clicks, you’ll find more advertisers willing to take CPC because it reverse engineers into a good CPM. Most companies are looking to drive revenue from their advertising. You need to understand the revenue results of every effort, regardless of how you pay for it.
Ultimately, as a marketer, the best model for you is one that drives high-quality users who engage and retain.
If you get your pick, take a model that has a guarantee of return. CPM can be dangerous because you can burn through thousands of dollars with no visible impact. CPI can be dangerous because you can get thousands of low-quality installs. But both models can work if you’re a savvy marketer with good technology.
If you can get a CPA model with a high bounty on an action that indicates high predictive life-time value, take the deal. The question is whether you can get it.
Whatever model you buy media with, ensure you have a smart, unbiased, fraud-finding way to measure the results of your campaigns across all partners and all sources.