Nerdy Affiliate Adventures In Affiliate Marketing Land

Calculating CPM vs CPC (Great for Facebook CPM ads!)

Posted by JasperP on May 27th, 2009

On facebook, you have the option of choosing CPC or CPM for your ads and you should always test your text ads with CPC first.  But when do you turn them into CPM ads?

To answer this question, you need to collect some data from your ads and determine the maximum CPM you can pay based on the clickthrough rates and CPC for your ads.

maximum CPM = CPC * CTR * 1000

For example, if you are paying 0.30 CPC and getting a CTR of 0.25% then your maximum CPM that you should pay should be:

maximum CPM = $0.30 * 0.0025 * 1000 = $0.75

Now, I like to think in terms of CPC, so I can change the CPMs to see the different CPC costs I would be paying.  The magic formula for that is:

CPC = [ CPM / (CTR * 1000) ]

Using the same example as above with the 0.25% CTR,  I can plug in different CPM of $0.70, $0.50, $0.30 to see the different CPC costs:

CPC = [ 0.70 / (0.0025 * 1000) ] = $0.28
CPC = [ 0.50 / (0.0025 * 1000) ] = $0.20
CPC = [ 0.30 / (0.0025 * 1000) ] = $0.12
CPC = [ 0.20 / (0.0025 * 1000) ] = $0.08
CPC = [ 0.10 / (0.0025 * 1000) ] = $0.04

So you can see the potential of using CPM to lower your costs.  By writing compelling ad copy and images that grab attention, you can lower your CPC costs dramatically.

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5 Comments »

Comment by ppc evolution

2009-06-21 07:23:42

great post. I use this exact formula in a detailed excel spreadsheet with all my offers.

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Comment by Ryan Eagle

2009-06-21 21:47:35

CPM = The only real way to make money on Facebook. It’s a great way to get past all the click fraud that’s been going on now. The entire goal is different with CPM in comparison to CPC too… you’re just looking for the most clicks possible.

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Comment by Brandon

2009-09-15 12:53:23

Thanks so much , I was trying to do a spreadsheet just now for FB ads and couldn’t get it right……I wish they would of explained to me in school how I would be using formulas to make money, oh well.
Brandon´s last blog ..Macs are Awesome……Or are they?

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Comment by Paul

2010-02-04 14:14:22

In most scenarios, CPM seems like the way to go. As long as you don’t get lazy and keep writing creative ads, there is $$$ to be made of FB

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