What Bidding Model is Best: CPM or CPC

When given the option to buy the same traffic on both CPM and CPC bidding models, what one should you choose?

Selecting the right bidding model for your affiliate campaign can lead to massive profits if you pick right one, or incredible losses if you select the wrong one.

Some traffic sources will sell the same traffic for banners and/or push notifications on CPC or CPM basis. The choice is yours. So what model should you choose for your campaign?

What is the CPM Bidding Model?

To understand what model will be best for you campaign, you first need to understand what each of the models mean. Let's start with CPM.

CPM means cost per mille, or cost per thousand. If you bid $1 CPM, then that would mean for every 1,000 people that see your ad you owe the ad network $1.

It doesn't matter how many times people click on your ad. You will still just owe the ad network $1 for those 1,000 impressions.

What is the CPC Bidding Model?

CPC means cost per click. If you bid $0.10 per click then each time someone clicks on your ad then you'd owe the ad network $0.10.

With this bidding model, it doesn't matter if 10,000 people need to see your ad before you get one click. You will still just pay $0.10 for that click.

CPC sounds great, as you only pay for actual visitors to your website, but let me explain why this might not always be the best option.

The Formulas

When you are working with a CPC bidding model the only thing that will affect how much you pay per visitor to your website is the bid. If you bid $0.10, every visitor is going to cost just ten cents.

CPC FORMULA
Total Visitors = Total Cost / CPC (Bid)
Cost Per Visitor = CPC

The CPM bidding model is a little more complex to be profitable because you not only have to worry about the bid, but you also have to worry about your CTR, or click through rate.

CPM FORMULA
Total Visitors = (Cost / CPM Bid * 1,000) * CTR
Cost Per Visitor = Cost / Number of Visitors

Note: Make sure when using the CPM formula you convert your CTR % into a decimal. 3% would be .03

CPM or CPC; What's the Best Bidding Model?

Let's do an example of a campaign with a $100 budget. If you were bidding with the CPC bidding model at $0.10 per click, then you'd receive 1,000 visitors to your website.

CPC EXAMPLE
$100 budget / $0.10 bid = 1,000 visitors to your website

Now if we used that same $100 budget with the CPM bidding model at $0.50 CPM and had a 2% CTR, you'd be able to get 4,000 visitors to your website.

CPM EXAMPLE
($100 budget / $0.50 CPM bid * 1,000) * 2% = 4,000 visitors to your website

So in this example if you were to bid CPM instead of CPC, you'd get 4x the number of visitors to your website for the exact same cost.

Remember the most important thing when bidding with CPM is that you have a high CTR creative so you can reap the benefits. If you don't have a good CTR creative, then you could end up paying more than you would with the CPC bidding model.

I usually like to start off a campaign bidding with CPC, then when I find a creative with a high CTR I switch over to bidding CPM to get more traffic.

When you bid CPC you know exactly how many clicks you will get for your $100 budget. CPM is riskier for you as the media buyer, but once you have quality ads it can be much more profitable in the long run.