Human beings spend almost 50 percent of the time of the day online, visiting websites, emails, social networks, etc. With that, we are likely to see ads (image/text/video). Online ads aim to generate profit through the posting of ads, on websites or social media.

There are two important ways that advertisers could use to drive traffic/visibility to their website, i.e. Cost Per Click (CPC) and Cost Per Impression (CPI). Let’s learn about them one by one with examples.

Cost per click (CPC)

Also called pay per click (PPC), this is an effective method of online advertising. Here, the advertiser pays money based on the number of clicks on the ad. You need to consider a few things before choosing this strategy, as the clicks would mean an interaction between the potential customers and your business. He is paying for exactly this, so you need to consider:

How much are you paying?

The kind of attention you seek?

The value you are receiving?

The advertiser pays money to publishers based on a formula or bidding process. Publishers search for third-party matches to find advertisers like Google AdWords or Microsoft Bing Ads. They hire these companies who in turn have complex algorithms to calculate what type of traffic is coming from where. If the advertiser’s product matches the traffic type, Bingo, there is a match.

Once posted, ads will remain on the website for as long as the advertiser has offered to pay. For example, if a website’s CPC rate is 1 INR, 100 clicks would mean 100 INR (1 x 100). Depending on the offer, the advertiser has to pay.

Cost per impression (CPI)

This is also known as cost per thousand impressions (CPM), where M stands for the Roman numeral 1000. This is the rate that an advertiser has agreed to pay for every thousand times the ad is viewed. Basically, every appearance of the ad for users counts as impressions. The price is set based on every 1000 views. Here only views matter, not clicks.

Ad servers monitor impressions and adjust the display rate to match an advertiser’s spend. CPI’s price representation is similar to that of print ads.

For example, if a publisher charges 10 INR CPM, the advertiser must pay 10 INR per thousand views. Simple truth! Usually, large websites use CPM to maintain a stable visibility of their product. A publisher prefers this because they only get paid for views and not clicks.

Which one to prefer?

Well, it largely depends on your sales. If the sales are good and the ad is not effective, then CPC is your friend. Clicks match you with prospects/customers. But, if the ads are good but the sales are not so good, CPM would help to get some viewers as well as clicks (imagine 100 clicks for every 1000 views). This could work very well as the views could get you customers.

Therefore, CPC and CPM are two sides of the same coin. Both have promising and drawback results. It largely depends on your marketing schemes. Also, optimizing ads based on performance would be great, like if you could change ad texts, image parts, ad positions, etc. These things have a strong effect on viewers.