To get the best value for your online spend, you need to know what you’re paying for. The price you pay for display advertising is normally calculated in one of three different ways: CPM, CPC or CPA.
CPM
CPM is short for cost per thousand impressions.
The amount paid per impression is calculated by dividing CPM by 1000 – so a $10 CPM would equal $.01 per impression. There are no ties between performance of the campaign and how ads are served or how they are paid for.
CPC
CPC stands for cost per click.
Using this price option, you only pay when your banner is clicked – regardless of how many times it’s shown. Networks use different types of data and technology to ensure CPC banners appear where they’re most likely to be clicked.
CPA
CPA means cost per action.
Here, you only pay after the banner has driven the user to your site and completed some sort of action while there – filling out a form, say, or downloading a recipe. As with CPC, your ads will be served in places that are likely to produce more conversions.
Next Lesson: Metrics and reporting