CPC vs CPM: which billing model works better for FB Ads?

Either you are new to Facebook ads or an old soldier of marketing, the creation of every new campaign begins with choosing an objective, type of bidding optimization and billing event model. For events, your choice narrows down to CPC (Cost per Click) and CPM (Cost per Mille aka Thousand Views) models. They are powerful but deceptive.

Both can bring you a windfall of profit for a song. Also, they both can suck your budget dry leaving no feasible outcomes on hands — it is the most likely result for a newbie. Luckily, Captain knows how to choose between CPC and CPM to make money work. Follow him.

Wait Cap, How Facebook Bills my Campaigns?

Advertising is a business, and advertising platforms have only one good to sell. All that Facebook really has is people that use social media — or, rather, their impressions. So, regardless your billing event, Facebook is oriented on the number of impressions needed to spend in order to reach your advertising goal. Moreover, there is a competition — bid price is based on the number of advertisers who try to reach the same audience and get its impressions.

In the upshot, the more impressions your ads needs, the more dollars Facebook will grab — even if your billing event is app installation. That is why the confident choice between CPC and CPM may bring you more profit for a fairly lower price.

What is CPC, Where to Find It and How It Works?

With CPC you pay only for clicks that people make on your ads, not for impressions. Sound like a piece of cake, and it is to a certain degree. Each incoming click spends its share in the daily budget, and when the budget is over, your CPC ad goes away from users’ screens. By “clicks” you may also count some other measurable interactions, say app installations or offer claims.

Here goes a typical case for CPC.

Captain wants people to visit a landing page of his online store to make them buy data analysis drills. He purchases “Click to Website” add with CPC and puts $100 budget in the ad with cute kittens that mine data with laser drills. Everyone likes kittens, so with $0.50 per click bid, Captain will receive 200 visits to his website and more than 3,000 impressions at the end of his campaign.

How CPC May Bring Me Down?

The devil is in “impressions” part of Captain’s case. You may easily speculate that a CPC ad is shown to a greater number of people than the number of clicks you receive. It means that you may get extra impressions and likes for “free”.

However, Facebook is not going to run charity advertisement business in observable future, and each click comes for a price.

However, Facebook is not going to run charity advertisement business in observable future, and each click comes for a price. As we already know, Facebook sells impressions rather than conversions, so it will try to get clicks at the lowest amount of impressions possible. In turn, the more impressions your ad needs to get a click, the more expensive it will be.

A covert link between impressions and clicks is a cause of main pitfalls of CPC.

  • Click price may be too high. Facebook’s bid estimate may be incorrect or fairly precise, which may make you overpay for clicks. No one knows the best price until he analyses his marketing data.
  • Low click-through rate pushes the ad out. Facebook will track ad’s effectiveness. If it doesn’t result in any clicks after few thousands of views, Facebook will bring it down. You are not to make awareness for free.
  • High click-through rate milks budget out. If your marketing genius is awakened and the ad performs extremely good, your budget will run out quickly. Sometimes faster than you can imagine.

In the upshot, you will not trick CPC to bring free impressions and low prices unless you use advanced analytics. Facebook will try to adjust CPC to the cost typical for your audience, and it usually succeeds.

Where CPC Works Better than Other Events?

If CPC was useless, Facebook wouldn’t keep it in place. There are some cases where CPC is the best option for you.

  1. You need conversions. It is simple — if you need people to do something outside Facebook, it is more reliable to pay for actions they do. That is why CPC is a default option for conversion-aimed campaigns unless data suggests high click-through rate of ads.
  2. You are new to Facebook advertising. CPC doesn’t lay gold eggs, but it is a low-risk option to test how marketing on Facebook works. You will surely get your clicks and generate some data to get insights for future campaigns.
  3. Your campaign is small. If you are going to reach the population of a small town or just not going to take high risks, CPC will help you to spend money wisely and with greater control.
  4. You are exploring new grounds. If you are going to sell something completely new to the market or your offer is controversial, it is better to bet on CPC and get clicks for sure. It is the only case where “free” impressions work for you — while paying for results, you will also increase audience awareness.
  5. Your click-through rate is typically low. There is a little of businesses who are happy with hundreds of clicks per thousand impressions, and even cute kittens may not help to sell laser drills Unless your typical conversion rate is around 2-5% of impressions, it’s better to stick to CPC.
  6. You are advertising to a broad audience. The same click-through stuff is here. If you cannot aim point-blank with your ads, it is better to pay only for successful hits.

What is CPM, Where to Find It and How It Works?

With CPM, Facebook charges you for each thousand of impressions gained by your ad. It is as simple as it looks like —the ad will be shown as many times as your budget can afford. The attractive and well-performing ad with high relevance score will help you to get cheaper bids, but impressions will be with you anyway.

Devils, bottlenecks, and pitfalls of CPC are far less scary for CPM. As far as you buy impressions directly from Facebook, all you need to deal with is bidding. A typical case is also simple.

Captain wants people in Dataville to get to know about the new collection of data supervision glasses. He chooses the Carousel with CPM model to show new lens colors collection. Captain invests $100 budget in the ad with a link to the Facebook page of his data drilling store. New color scheme drives people crazy of data analysis, and with $10 CPM bid his Carousel was shown to 10,000 citizens of Dataville — almost a third of town’s population. 50 people soon ordered new glasses online, and 100 new consumers dropped in Captain’s store in few days.

Alright, Cap, What’s the Catch?

Captain did not pay Facebook to entertain folks with his glasses in newsfeed — all he wanted is to make people aware of data supervision and lead them to his store. If his ad hadn’t been viral, he would have anything but $100 budget that went out in flames. With CPM, Facebook may deliver ads hastily to audiences, grab your budget and leave you with few conversions if you don’t have a good ad.

That is why marketers need to know cases where CPM works best.

  • CPM is a must to gain audience outreach and views. It is an only case where impressions are of value by themselves. Discounts, launches of new products, social events — all they need is to reach right people, and CPM serves dozens of thousands of impressions.
  • CPM delivers ads fast. If you have something urgent to tell to your consumers — say, a penguin in your zoo fell in love with an anime girl — CPM will skyrocket your message.
  • CPM provides better CPC if you have insights on how your ads work. If the ad works good, CPM is a more cost-effective way to gain clicks, visits and other conversions than bluntly paying for them with CPC. However, it requires a careful control and analysis of your campaign to find effective ads, prioritize them and remove in time.
  • CPM is best for targeting very specific audience. If you have enough data to make sure that your audience responds to the advertisement, or you advertise for a very narrow group, CPM grabs best ROI. A bakery shop in a district with 50,000 dwellers will have great results with only 20,000 impressions, and remarketing to your consumers with CPM is likely to bring you higher click-through rate than CPC for the same budget.

Captain prefers using plain facts, so let us employ statistics. Average CPC in the US was $0.274 in 2016, and CPM was $7.34. So, if your CPM ad had resulted in at least 2.7 percent conversion — just 27 clicks per thousand views — you would have chosen CPM. That is why marketing data analysis is crucial to save your budget from being robbed by Facebook.

Choosing Between CPM and CPC in Real World

In order to be a superhero marketer, you should understand your needs and context of your business. It is best illustrated by the most successful cases.

Let us take a look in data supervision glasses on 2017’s Facebook Award Winner, Litbaits. They represented a small bookstore that desperately competed with online retail giants and had a little of cash for a massive campaign. Moreover, they wanted to increase brand awareness and engage with more people on Facebook, and sales were desirable but not of utmost importance. So, they fine-tuned a clickbait ad with CPM model…

That is how the master-level marketing of The Wizard of Oz looks like!
.. and pushed up their website traffic by 14,000%, made headlines of the biggest newspapers and won Facebook Award!

Their choice of CPM was not a stab in the dark. They wanted to reach as many people as possible, so their primary target was impressions. Moreover, their ad was tailored to the broad audience and triggered every Tom, Dick and Harry to make a click. However, if Litbaits had tried to sell The Wizard of Oz exactly rather than advertise the whole shop, they would use CPC. Hardly everyone who came to their site bought a book, and Facebook cautiously avoids talking about sales.

So, CPM or CPC?

Every decent marketer analyses data, situation, audience, and acts to make the most of them. With CPC you minimize risks and get conversions for sure, which is the best decision in many cases. At the same time, CPM allows you reaching larger audiences, building awareness cheaper and getting more cost-effective conversions in narrow audiences as compared to CPC. That is why Captain has a chart of special cases where he uses CPC or CPM only.

Best for CPC Best for CPM
Generic conversion-oriented campaigns. Massive audience outreach.
First steps in Facebook advertising. The quick building of audience awareness.
Very small campaigns with definite performance objectives. High cost-effectiveness for ads with proved click-through rate.
Promotion of uncommon product/to unfamiliar audience Advertising to well-known and narrow audiences with high response rate.
Advertising of products with moderate audience response. Broad audience marketing.

However, effective usage of CPC and CPM requires an understanding of ads’ performance, audience preferences and unique specifics of marketing for your business. You would also need a keen eye for campaigns progress to make adjustments in time. That is what Captain Growth does. He pulls out the most crucial insights from your marketing data to make ads’ outreach grow on steroids and then kicks off all redundant expenses.

For his ally is machine learning, and a powerful ally it is. Join the AI side of marketing by giving Captain Growth a try.

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