With small and local businesses gaining main stream attention, particularly through Facebook Ads, every one with a product is eager to jump on the band wagon and make a quick sale. But a lot of people who want to try it out get trapped in the technical terms which sometimes prove to be hard to wrap your head around. With this article we will try to put an end to this dilemma of yours.
There are many terms used in Internet marketing or online advertising industry such as CPM, CTR, PPC and CPI. Let us try to take these terms one by one so that after you have understood them, you will end up with a better mindset regarding budgeting of your marketing campaign.
- CPM:
CPM stands for Cost per mile, it is also known as CPT (Cost per thousand). The term is relevant and used in almost all of the advertising mediums like Radio, Television, Magazines etc. But it has come in public domain with the growth of internet marketing. CPM is calculated by dividing the total cost or Budget for running the ad campaign by the total number of estimated viewers and then multiplying the result by 1000. For example if the total Budget is $20,000 and total estimated viewership is 2,000,000 then CPM would turn out to be $10. The main objective of calculating CPM is to compare the expenditure for your campaign across different advertising Medias.
Calculating CPM can be a very useful metric to decide whether you should take your campaign to internet or not, alternatively it may also be used to decide which service provider you should side with.
- CTR:
CTR stands for Click through rate. It is considered as an ultimate metric for measuring the success of an internet marketing campaign. CTR is obtained by taking the number of times an advertisement is clicked by total number of times the advertisement was displayed. The result is multiplied by 100 as it is expressed in terms of percentage.
A point that demands attention is that higher click through rates with low purchases can mean loss.
The main objective of CTR is to make an assessment of customer’s initial response to the ad displayed. If you have an unusually low CTR then it can very well be an indication of the fact that your ad is not interesting enough and you need to make some updates to it.
- PPC:
PPC stands for pay per click. As discussed above, clicks are informative of the customer’s opinion. A high click rate shows high interest and a low shows otherwise. For the same reason PPC is a preferred option for such an assessment compared to CPI( Cost per impression).
PPC may be easily calculated by dividing the total budget for online marketing campaign by the total number of clicks generated by concerned web impressions (Displayed ads).
When it comes to PPC, there are two models that are widely followed:
- Fixed-rate model – In such a model, the publisher has a rate card or list that may display different PPC rates for different areas of their websites. Areas or pages that attract more traffic will have a higher PPC rate as compared to those which are rarely visited.
- Bid-based model- In such a model, the advertisers are required to compete against each other in an auction for particular ad spots. There are many advertising agencies who offer PPC bid management services to small and medium business owners.
Now that you understand these terms more accurately, you can plan your budget accordingly for your online marketing campaign.
The author of this article is an expert in online marketing campaigns and works as a consultant in an advertising firm. Matthew has written and published several articles on conceiving and optimizing Facebook Ads.