Choosing between PPC vs CPM Banners Ads
PPC and CPM, no
these aren’t colleges about to face each other on the field. PPC (pay per
click) and CPM (cost per thousand) are two methods for paying for banner ads.
Each one has it’s place in an effective campaign, in fact I’d go so far as to
say that nearly any online campaign should utilize them both. In this post
we’ll explore the reason’s why you should consider them both for your online
marketing plan.
Introducing the contenders
PPC,
or pay-per-click, means that each time a person clicks on your ad you will pay
a predetermined amount. This model makes up the majority of Google Adwords
ads. The nice thing about it is you are guaranteed a set number of traffic for
a set price. In other words if you say you want to pay one dollar per click and
you set a budget of 1000 clicks, you will get no more than 1,000 clicks and
will pay no more than $1,000 dollars. Of course that can also be viewed as a
weakness. You will not get more than 1,000 clicks because once your budget is
spent, your ad disappears until the next cycle.
CPM,
or cost per thousand, is based on impressions, or views, of the banner.
Generally the pricing is based on increments of 1,000 impressions. You are
guaranteed that your ad will be displayed on the web page a visitor sees. The
benefits of this model are that a banner will be seen a set number of times,
the drawback is that you can’t absolutely guarantee an exact number of hits to
your website.
Common Misunderstanding
Over
the years I’ve encountered many people, even among professional online
marketing people, that write off CPM completely. They say that since PPC has a
guaranteed flow of traffic that there is no reason to use CPM. The
most
important common feature of both methods is that their purpose is to drive
traffic to your site. Click Through Rate (CTR) then becomes the most important
tracking number for us to look at. For the sake of this example, we’ll also
assume that basic research has been conducted correctly and that the ads are
being placed on websites which are frequented by your target audience. Across
all industries the average CTR for banner ads currently sits at 0.9%, for easy
math we’ll just round that up to 1%. The average cost per click in PPC is $0.89
and the average CPM is $0.24. We’ll set our CTR goal at 1,000 for the example.
We’ll
start with PPC. The math here is very simple, for 1,000 clicks you’ll pay $890.
Based on the industry average of a 1% CTR you know that if you have 1,000
clicks, then your ad displayed approximately 100,000 times.
Next
comes CPM. In order to hit your target of 1,000 clicks you’ll buy 100,000 views
at the average price of $0.24 per thousand. If you multiply 100,000 by $0.24
per thousand you find that you will pay $24 to get the same number of views and
clicks as a PPC campaign
Here’s
a
handy table to make it easier to see the comparison:
Knock Out Punch?
Suddenly CPM doesn’t look so bad,
right? So, why don’t I tell you to stop using CPC altogether? There are two
main reasons, first, not all industries perform as well as others as far as CTR
is concerned. Second, some sites only allow for small text ads to display which
historically have a much lower CTR than banners that allow images or rich media
(animation, sound, etc.)
Boil it down
After everything is said and
done, you should choose the ratio of your PPC and CPM after researching your
industry’s performance and costs in each. Research the sites on which the ads
will run to make sure they are visited by your target audience. If you find
yourself getting stuck on the research part or in deciding what ratio you
should be using get in touch with me for a consulting session
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