In online marketing there are many ways to invest money in advertising – combined with numerous billing models that I would like to briefly explain here.

In any case, the identical initial letters “CP” are noticeable – they mean nothing else than “Cost per”, ie the costs for a specific unit or action. How is billed and which models are useful for which purpose is briefly explained below:

CPM

“Cost per Mille”, ie the cost per 1000 banner displays indicates how much money you have to invest to display an advertising banner 1000 times on a website. This billing model is also known from the print sector, where it shows the costs for an advertisement in newspapers or magazines on the basis of the readers reached.

This type of billing is widespread for the delivery of graphic advertising materials – whether static banners, animated GIFs or interactive HTML5 advertising materials. The price is based on the quality of the website and the placement within the page.

Today, a large part of CPM purchasing is sold using real-time bidding (RTB).

CPV

“Cost per View” is the further development of the CPM model and is intended to guarantee that a user has actually seen an advertisement. This is particularly important in the area of video advertising, since only those advertisements are billed that are actually viewed. But CPV can also be used for banners and social media advertising materials, for example if the advertising material offers an opportunity for interaction (gamification, play button, credit calculator, etc.)

CPC

“Cost per Click” – with this billing model, the clicks that are made on an advertising material count. In the article about click deviations , I explain why the invoiced value often deviates from the results measured on your own website, for example using Google Analytics. This form of billing can be found in search engine advertising (paid search), but also in the area of social media marketing.

CPA

“Cost per Action” marks a range of different billing models, including CPL, CPO / CPS, and CPI. The CPA is based on an action that the user should take and which then leads to remuneration. For example, sending a request, installing an app or purchasing a product. But a click on a banner can also represent an action.

CPA is therefore the price that one is willing to pay for a user action to be defined.

CPL

“Cost per lead” refers to the price for the user’s contact details – for example by sending an inquiry form or forwarding the data as part of a sweepstake. This lead can then be used to process the request or for marketing measures.

In times of the GDPR, it is important to generate these leads in accordance with data protection regulations, here you should inform yourself extensively in order not to risk legal issues.

CPO/CPS

“Cost per order” or “cost per sale” indicate the price for the sale of a product or service. This is usually measured as a percentage of the value of the goods, but in some cases fixed values are also used.

This form of accounting is popular with online shop operators because the costs are calculable and a commission only has to be paid for a real sale.

CPI

“Cost per Install” indicates how much you have to pay to have an app installed by a user. In order to get apps to the top of the app store charts in particular, many developers rely on CPI campaigns to get as many app installs as possible in a short time.

Advantages and disadvantages

There is no such thing as a perfect billing model – if you start early in the chain and buy on CPM or CPC, it is your own responsibility to guide users towards the desired goal (sales, lead, etc.) It all starts with addressing the right audience that is really interested in the product or offer. If the user is interested, it is important to address them precisely and, for example, to make filling out a contact form as easy as possible for them. Significantly more factors play a role here, but they would go beyond the scope.

The alternative is to choose a billing model that guarantees the desired effect. If you want to sell products – then choose CPO / CPS.
But it’s not that simple – if you blindly strike at the first CPO offer, you shouldn’t be surprised if the quality of the sales is poor – be it due to many returns or low shopping cart values. Purchasing on CPO can also lead to a postponement – sales that were previously made without costs are now assigned to the CPO provider because he has addressed the user once and booked the sale for himself.

There are also some pitfalls with CPL or CPI, for example in the form of incentivized leads or installs. The provider passes a part of his CPL or CPI to the user so that he can fill out the form or install the app. Such users rarely remain active or are really interested in the product. Maybe an option for a short-term push in the app stores, but not for a long-term build-up of a user base.

In all cases, the quality of the traffic is decisive, which starts with CPM when the banners appear in the invisible area of a website, for example, or are loaded in environments with which you do not want to associate your brand. At CPC, too, a lot depends on whether the user is a real person at all, who clicks voluntarily and really wanted to reach the advertising medium and not the button next to it.

I would be happy to advise you on how to get the most out of your advertising budget.