In this corner of the ring is cost-per-thousand, the oldest advertising pricing model. And in the far corner, the opponent: cost-per-click. They’re slinging it out in the battle of the advertising pricing models. Who’s the champ? The battle of CPC versus CPM has come to the forefront now that online advertising is reaching maturity. Which is better: CPC or CPM? It’s the question that marketers have been asking since the beginning of the online advertising age. Mathematically, it’s easy to compare CPC to CPM. Here’s an example of how to do it: (CPC means Cost per Click ads, while CPM means Cost-Per-Thousand Impressions of the ad.) Assume that you bid $1.00/click for your CPC ad and commit to a $2,500 budget. You are guaranteed 2,500 clicks. Now assume that you agree to pay a $15 /cpm for the same ad and commit to the same $2,500 budget. You are guaranteed that your ad will be seen 166,667 times. To get the same number of clicks, 1.49% of the people who see the ad would have to click on it (that’s click through rate, or CTR). 

Mathematically comparing the cost of CPC to CPM is simple. Knowing which produces results that drive sales…that is the hard part. Many pontificate, but few reach full knowledge and understanding. Calling for proof, marketers want studies to gauge the effectiveness of online advertising. But what exactly are they measuring the effectiveness of?