Explaining Industry Digital Buying Metrics

By Convertr - July 16, 2014

I thought it might be good to go over this in some more detail.

Before we start, let’s talk some basic definitions:

Metric Acronym Stands For Means
CPC Cost Per Click £x for 1 Click on your Link/Advert
CPA Cost Per Acquisition £x for a Desired Outcome (e.g. A Completed Transaction)
CPL Cost Per Lead £x for a Qualified Lead
CPM Cost Per Thousand £x for 1,000 Ad Impressions

The first 3 – CPC, CPA, and CPL – are performance metrics. CPM, however, is not.Can you spot the odd one out?

A performance metric is one that delivers a certain specific result for your money. Clicks, sales, or leads – they’re all specific and useful end results.

Impressions, however, wouldn’t fall into the same category – they are one step higher up the sales funnel than the other 3. That’s not to say that impressions are not useful, because they are. In terms of delivering branding and audience reach, CPM is the industry standard. It’s just not very useful as a performance buying metric.

CPM campaigns are about delivering visibility. That’s why I’ve said in the past that CPM is a kind of bridge between old-school media buying and digital. It’s the metric for buying audience, and for delivering a message to that audience.

The bottom line for publishers – and they’re the people who will be delivering a CPM campaign – is that CPM pays them for serving ad impressions. So, if the advertiser orders 1,000,000 impressions, and the publisher delivers 1,000,000 impressions, the publisher gets paid.

That’s great if, as an advertiser, your primary objective is visibility – those 1,000,000 impressions mean that your brand has been seen 1,000,000 times. But if you’re looking for anything more – deeper engagement, site traffic, expressed interest or sales – then the metric lets you down. Why? Because the publisher has no reason whatsoever to try to help you achieve those ends. You’re paying them for impressions, remember, so that’s what you’re going to get.

It’s unfair to expect anything else, really. After all, you get what you pay for (not monkeys for peanuts, in this instance, but impressions for CPM). Impressions give you a lot of things, but a guaranteed performance end result is not one of them. In reality, you can spend large portions of budget on CPM and drive zero traffic, generate no leads, and see no sales upside. Which, again, isn’t a criticism of using CPM as a buying metric – it’s just important to understand precisely what it is that you’re buying.

There’s a possible argument that as CPM delivers large reach for relatively small costs, it can be used as the foundation for delivering against any performance target and do so cost-effectively. Let’s take a look at that maths with lead generation as the advertiser’s desired end-goal. In this example, let’s say that a CPL buy might cost £80. How does CPM advertising at £5 stand up?

On a CPM basis, buying 1,000,000 impressions at £5 would yield the advertiser 40 leads, effective CPL £125 – not competitive compared with our £80 straight-CPL model.

1,000,000 Impressions @ £5CPM  
0.02% Click Rate = 200 Clicks  
20% Convert to Leads = 40 Leads  
40 Leads for £5,000 40 Leads for £3,200
Effective CPL = £125 CPL = £80

Of course, the maths varies depending on the CPM you’re paying, and the CPL price. We’ve taken our assumptions from the experience that our team has had in the industry – actual results will differ.

The overall point is, buying specifically for the results you’re looking for will generally deliver better, and be cost-effective. There’s a big security upside too – when buying CPM the advertiser has to pay for the impressions delivered whether they hit a performance results target or not. Buying with performance metrics negates that risk – you only pay for the results that you want – no deliver, no cost.

A recent conversation that we had with a client, when discussing the opportunity to buy on a cost-per-lead basis: “our agency doesn’t really see how CPL fits into their existing CPM activity”.

That’s unsurprising – the two activities are very different. Different transmission methods, different publishers, different metrics for different end results. CPM activity may well be measured against how many leads it generates by the advertiser and media planner, but that doesn’t change the fact that a publisher is focused on one thing alone – delivering impressions.

What’s your end strategy? That’s the key factor in determining the best spending metric. Buy on a metric that delivers the results you’re seeking – whether that’s leads, sales, clicks, or impressions. Paying your delivery partner for the results that you’re looking for incentivises them to succeed, and puts the onus on them to do the hard work.

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