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What is CPC?

Cost Per Click. Known also as pay-per-click (PPC) from the publisher’s point of view. In this model the advertiser pays for each click made on a banner impression.  Payment depends on the number of clicks solely.  For example, a banner is being shown 200,000 times, and being clicked 1000 times at a cost of $0.08 per click.  The Click through rate – CTR in this case is 1000/200,000 = 0.5%. The cost to the advertiser would be $0.08 * 1000 = $80.  Since the advertiser paid $80 for 200,000 we say that his Effective CPM (or eCPM) is 80/200 = $0.4.

Advantages

  • The advertiser knows exactly how many times his landing page / site will be clicked, and what would be his daily / total costs.
  • The banner will be shown until enough clicks are being generated
  • Common model when looking for exposure with no direct lead or sale goals
  • CPC is optimized quiet fast by optimizing ad-networks to generate high CTR
  • Reasonable indicator for banner quality

Disadvantages

  • Weak correlation with Sales or Leads
  • Dependable on click tracking technology and measurement
  • Weak performance matrix, vulnerable to click frauds
  • No indication for campaign quality (only banner quality)
  • Advertiser might receive cheap media instead of effective media
  • Effective frequency capping is unknown

Example:

Day 1 Day 2 Day 3
Impressions 200,000 150,000 150,000
Clicks 1000 1500 1000
CPC[fixed rate] $0.08 $0.08 $0.08
Cost $80 $120 $80
eCPM $0.4 $0.8 $0.53