If you are new to digital marketing or haven’t been involved much in online advertising, there are a number of terms that may seem alien to you. CPI offers, CPA media buying and CPM – what do they stand for and how do they work?
Luckily for you, we have a handy guide to show you exactly this. In this blog, we are going to explain to you the differences between CPI, CPM, and CPA. Not only will this help to give you a solid understanding of these key terms and how they fit into online advertising overall but you will also have a good idea of what works best.
What is CPI?
CPI stands for cost per install and a CPI model is mainly targeted towards mobile users.
Over 50% of internet traffic worldwide is from mobile devices. This confirms what recent trends have been showing us over the past few years – more people are using smartphones and tablet devices to access the internet. While laptops and desktops are still important, ignoring mobile devices means you are excluding a bit part of the market.
CPI works by paying out whenever a user downloads and installs an app on their device. So, instead of being paid per click (CPC) or even by 1000 impressions (CPM which we will look at in more detail below), CPI models pay out when an app is installed after that user has interacted with an ad. If you have an ad on your website that promotes an app and a visitor to that site clicks on the ad then installs the app, you get paid. This is also a cost-effective method for an affiliate because you only pay when the app is installed.
What is CPM?
CPM means cost per mille.
Mille comes from Latin and it means ‘a thousand views’. Instead of being paid per install or per action, a CPM model works by paying out when that add is viewed 100 times.
If there is an ad on a website and 1 user views this ad then that counts as 1 impression. When the ad is loaded 1000 times either on a webpage or even on an app, this is 1000 impressions. The great thing for website, blog or app owners who are working on a CPM basis is that the ad only needs to be loaded 1000 times, it doesn’t need to be clicked on or purchase or download made. These work best for people who have a high volume of traffic to their site. If your site only receives 200 visitors a month then CPM probably isn’t going to work for you.
There are many CPM offers out there that have different rates of pay out however the general consensus is that CPM networks will pay out between $1 and $10 per 1000 views of the ad.
What is CPA?
Finally, we have CPA which stands for Cost per action. What is CPA in affiliate marketing?
Well, this is perhaps the most common offer you will see and you have maybe heard of it previously. It works differently than CPM however it is similar to CPI.
With a CPA model, the advertiser pays out when there is a conversion. For example, if you have an ad on your blog which promotes a particular product and someone clicks on that ad and then buys the product you get paid. All this depends on what the desired action is that the advertisers want. It might not necessarily be to buy the product it could even be to sign up to the website, navigate to a particular part of the site or something else. It is the most popular model for many advertisers because it means they only pay out when an action is completed as opposed to just viewing the ad or clicking on it.
Which one works best for online advertising?
Now we know what CPI, CPA, and CPM stand for and how they work at a basic level – what is the best?
This really depends on several factors such as how much traffic your website receives, what platforms and devices your visitors come from and how much the advertisers pay. For mobile-only devices then CPI is perhaps the best model to follow as it deals specifically with app installs however it is difficult to control the quality of traffic with this approach. Most advertisers prefer CPA as it means they only pay when a specific action is performed and depending on the ad and your site then this may or may not work best for you. For uncapped scalability then CPM would be the best approach.
All 3 offers have advantages and disadvantages. Before you choose as offer think carefully about your site, blog or app, the number of visitors you have and where they come from and finally the devices they use before you make a decision.