Understanding CPM vs CPC Advertising: Maximizing Your Paid Media ROI

CPC and CPM are two popular types of paid ads, and having a solid understanding of when to use them is vital for the success of your eCommerce business. Read on to learn how each option works and how to use them to your advantage.

What is CPM?

CPM stands for cost per mille (Latin for thousand) and refers to the amount paid for 1,000 impressions of a paid ad. The overall idea behind CPM is that the more you spend, the more exposure you get.

You’ll often see CPM used for branding campaigns, as it’s a way to get your name out there without necessarily targeting generating new sales. The primary benefit of CPM is that you can get a lot of reach, but the downside is that you’re paying for a lot of impressions that don’t convert to sales.

That trade-off is why it’s critical to know when to choose a CPM campaign and when to choose a different ad type.

How is CPM Calculated?

CPM metrics measure the cost of advertising per 1,000 views. So when you see a specific dollar amount for CPM, that figure is calculated by dividing the total amount spent on advertising by the number of impressions.

For example, if an advertiser spends $100 on a CPM campaign and their ad is viewed 10,000 times, their CPM would be $10.

CPM Benchmarks

Now that we understand CPM let’s look at overall CPM benchmarks to give you an idea of what to expect. We’ll use Facebook as a benchmark example, but almost every advertising platform also offers CPM and CPC options.

The average CPM for Facebook Ads in 2022 was roughly $14; however, be aware that this includes all campaign objectives. Therefore, your specific objective may be cheaper or more expensive per view.

Additionally, the above stat is for every advertiser on Facebook, ranging from high-end real estate to budget apparel. Therefore, it’s not an accurate way to benchmark your results.

That’s why Varos offers a unique service that provides real-time benchmarking against peers within your industry using the same platform. Below you can see how your CPM is compared to your competitors:

What is CPC?

Cost-per-click (CPC) refers to the amount paid for each click on an ad. CPC is one of the most common options for paid ad campaigns on all platforms due to its focus on driving conversions.

However, the downside is that you’re paying for clicks that might not convert. That downside is why driving your paid ad traffic to carefully crafted landing pages, a refined website, or a UX-optimized app is crucial to making the most of every cent spent on clicks. 

Unlike CPM, which is more about awareness, CPC focuses on generating conversions and revenue for your business.

How is CPC Calculated?

CPC is calculated by dividing the total amount spent on advertising by the number of clicks. For example, if an advertiser spends $1,000 on a CPC campaign and users click their ad 500 times, their CPC would be $2. 

It’s worth highlighting that the CPC displayed by the platform is the average cost of all clicks, as the cost of each click may vary for the same campaign based on a range of other factors, such as time of day, bidding strategy, and ad relevance score.

CPC campaigns may seem more expensive, but you can't necessarily compare them directly since CPM and CPC have different goals. Ideally, CPC will generate enough revenue to create a positive ROI, while CPM is more about letting people know your company exists.

CPC Benchmarks

The Facebook Ads average CPC in 2022 was approximately $0.97. However, this stat includes every advertiser on Facebook. Your CPC may be much higher, but that amount might be average for your industry.

That’s why it’s well worth using Varos to understand how your CPC compares to your peers, not everyone on the platform:

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CPM vs CPC: Which One is Best for Your Business?

So how do you choose between CPM vs CPC ads for your next campaign? We’ve touched on how they vary; now it’s time to drill down into how each one works — then how they can be used to drive uniquely different results for your business.

You’ll Need Both CPC and CPM

Simply put, CPM and CPC are both vital for operating a successful eCommerce or SaaS business.

CPM is a great choice if you want to broadly promote your brand, while CPC is suited for campaigns focusing on making a sale (or another type of conversion).

CPC ads are more expensive than CPM e commerce ads at face value; however, a CPC campaign can offset its cost and generate a positive ROI by converting users into customers.

It’s usually harder to track a CPM campaign's ROI since they aren’t going directly for the sale but making customers aware of your business, which is the first step in the customer journey. You might not even know if a new customer originally heard about you through a CPM ad.

So you can use a combination of both types of ads to maximize your ROI. For example, you may follow up a CPM campaign with a CPC campaign to help move the customer journey forward. 

How to Maximize Your Paid Media ROI

How do you leverage both paid ad types to maximize your paid ad ROI? Let’s explore a few effective ways to leverage both CPC and CPM campaigns to generate new customers, leads, or subscribers so your ad spend translates to business growth.

Choose the Right Campaign Type

Every campaign should start by choosing the overall objective long before you start working on the actual creatives.

CPM and CPC extend to broader objectives, as we’ve explored. Don’t start by thinking about CPM vs CPC; instead, start by thinking about increasing brand awareness or generating more sales or leads.

If you focus specifically on CPM or CPC, you may look too closely at the varying costs or conversion rates. So take a step back and think about what your business actually needs.

Your objectives extend naturally into CPM, CPC, or even another campaign specific to a platform, such as LinkedIn’s cost-per-send (CPS). Then you’re ready to start working on the creatives to support your business objectives.

Create Compelling Ads

Ad creatives should support the business objective and be designed for the type of campaign you’ll be running.

You may already know you need well-written ads, a compelling call to action (CTA), and intriguing imagery (when applicable).

But exactly how you execute each of these factors depends on your goals. Brand awareness will inform users about your business or product from a high-level view.

Conversely, creatives focusing on earning clicks should accurately convey what’s unique about your product or service. 

The CTA is arguably the most crucial part of a CPC campaign, whereas it’s secondary to the goal of a CPM campaign.

Every step of creating the ad needs to keep the goal in mind. Then, before finalizing the campaign itself, analyze the campaigns and if they meet the stated goal or need revisions.

Provide the Best Possible Customer Experience

Make it easy for someone to become a customer after they click on your ad or visit you later after a CPM campaign.

The customer experience (CX) has become an increasingly vital topic over the past few years. With rare exceptions, you likely aren’t the only business offering what the customer needs. If you provide a poor CX, and the competition is pain-free — you’ll likely lose business.

Evaluate the entire buyer’s journey to look for any friction points. Is the site loading quickly? Does it display correctly on all common devices and resolutions? Is the checkout or sign-up process simple and easy?

You can test much of this on your own, and for the rest, you can analyze historical traffic and usage analytics to identify areas that cause people to leave.

Refine the customer experience so that if your ads are effective, your site or app is ready to turn them into a customer.

Sign Up with Varos for Real-Time Competitor CPM and CPC Benchmarking

It’s clear you need to put both CPM and CPC campaigns to use to grow your business effectively. Choose each method strategically, craft campaigns around them, and make it easy for new visitors to become customers or subscribers. 

However, it can be a challenge to understand exactly how much you should spend per click or mille. Relying on broad, infrequent marketing KPI reports isn’t enough to benchmark your results.

Varos provides a valuable way to gauge your success or failures. Your Varos dashboard shows your results alongside your peers’ — all in real-time. You can identify how to catch up or stay in the lead from there. 

Below you can see how our tiered breakdown makes it easy to see where you stand:

Ready to gain a competitive edge? Sign up today or book a demo to discover how Varos helps maximize your paid media ROI with real-time benchmarks.

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About the Author

Yarden Shaked

Co-founder & CEO at Varos

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