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17 December 2021
#Internet marketing

CPM, CPC, CPV, CPA, CPS: Overview of Advertising Pricing Models

At BYYD, we work on different pricing models, not only standard CPM and CPC. Let’s take a look at each of the models.

CPM

CPM is the cost per mille. The calculation uses the following formula: cost of an ad/number of impressions x 1000. CPM depends on the website/app, the geography of placement, theme, even seasonality, writes Publift. For example, in the “high” season of holidays and sales, the CPM may be higher and the “low” season correspondingly lower.

CPM comes in handy in out-of-the-box advertising campaigns to increase brand or product awareness. In such advertising campaigns, the goal is to increase the number of impressions and reach more people.

CPC

CPC — Cost Per Click — It is a model in which the advertiser pays for every click made on the ad. The price is dividing the cost of your ad by the number of clicks.

According to Owox, the parties can fix parties (if they agree on payment in advance) — or calculate it based on the bid when the advertiser sets the CPC and participates in the auction for the right to display the ad on the publisher’s website.

Average CPC varies by industry, business type, and ad network.

CPV

The pricing model in video ads is a cost per view. According to ironSource, CPV is used in video advertising campaigns to increase brand awareness since the payment model focuses specifically on impressions. CPV comes by dividing the ad cost by the number of video views.

Unlike CPM — a metric similar to CPV (the second one requires more user engagement) as a rule, a view is counted after a certain number of seconds of the ad has passed. And this is beneficial for the advertiser, writes BigCommerce. No payment is charged for those not interested and immediately closed the video.

Although this advertising pricing model traditionally intends for image-based advertising campaigns, it is also used in performance campaigns, in particular, to promote mobile applications. It allows performance advertisers to keep their bids competitive.

CPA

The pricing model implies the advertiser’s payment for each conversion action of the user, such as subscription, registration, and purchase. Accordingly, CPA consists of dividing the cost of advertising by the number of targeted activities. PubLift writes that this model was used more often in the 2000s with affiliate ads, although it is still popular today.

CPS

The pay-per-sales model is one of the subtypes of the CPA model, writes Business of Apps. It is calculated using the formula: cost of advertising/number of sales.

It is a low-risk model, as the advertiser can track every sale, which is the conversion action that the advertiser is aiming for. CPS ad campaigns are a good choice for advertising traditional products, but they are also relevant in mobile applications when the goal is in-app purchases.

A potential drawback of CPS is that it does not always reflect user behavior. Some may return to the advertiser’s website later to buy a product, and the company will not understand that the sale was the result of advertising.

BYYD works on different purchasing models, but we usually hold advertising campaigns for CPM and CPC models since our channel aims at image indicators. In the first one, we guarantee ad impressions, and in the second one, clicks. 

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