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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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Posted in: Affiliate Marketing
Comments(11)
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great post. I use this exact formula in a detailed excel spreadsheet with all my offers.
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.
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? =-.
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
I was wondering if anyone can help me a bit?
I have a book repair and bookbinding business.
I am basically trying to grow my clientelle for my book repair business. I make blank books for journalers, as well. I want to get people to my website so they can see the product I make, the options they’ll have for custom work, and the fact that I also do book repair.
At the moment I am contemplating advertising on Facebook, but am not sure how to use my limited budget. I guess I sort of understand the way CPC works vs. CPM…but maybe not quite! With CPM…does my ad show up on the right hand of the screen? What exactly does “1000 impressions” mean? It will show up 1000 times and then be done? If someone sees my add and then clicks on it during the “1000 impressions” will I be charged more?
For example…say my budget is $50 a week…when they give me a cost estimate of $1.13 per click, does that mean as soon as I get 44 clicks my budget is spent? So 44 people who actually look at my website?? Now what if I was using CPM…in the same scenerio, would I reach my budget limit sooner if, during those 1000 views, more than 44 people clicked?? Oh, it is so confusing to my right-sided, artistic brain!
And, I’m very frustrated because I can’t really find the answers to these questions on Facebook…are they deliberately obtuse on the subject? Or am I just a blockhead?
Any advice you can offer would be wonderful! Thanks, in advance.
-Michel
I was wondering anyone can help me a bit?
I have a book repair and bookbinding business.
I am basically trying to grow my clientelle for my book repair business. I make blank books for journalers, as well. I want to get people to my website so they can see the product I make, the options they’ll have for custom work, and the fact that I also do book repair.
At the moment I am contemplating advertising on Facebook, but am not sure how to use my limited budget. I guess I sort of understand the way CPC works vs. CPM…but maybe not quite! With CPM…does my ad show up on the right hand of the screen? What exactly does “1000 impressions” mean? It will show up 1000 times and then be done? If someone sees my add and then clicks on it during the “1000 impressions” will I be charged more?
For example…say my budget is $50 a week…when they give me a cost estimate of $1.13 per click, does that mean as soon as I get 44 clicks my budget is spent? So 44 people who actually look at my website?? Now what if I was using CPM…in the same scenerio, would I reach my budget limit sooner if, during those 1000 views, more than 44 people clicked?? Oh, it is so confusing to my right-sided, artistic brain!
And, I’m very frustrated because I can’t really find the answers to these questions on Facebook…are they deliberately obtuse on the subject? Or am I just a blockhead?
Any advice you can offer would be wonderful! Thanks, in advance.
-Michel
This for this advice. I am still considering if I would venture into FB ads or not.
Hells yea! I couldn’t find this info anywhere and I was brainstorming how basic math is supposed to work again lol.
CPC = [ CPM / (CTR * 1000) ] is exactly what I needed.
This is much appreciated!
.-= Chris´s last blog ..My Favorite IM Tool Of The Week: Mr. Greens POF Ad Uploader =-.
Since ctr is generally displayed as a percentage, an easy way to do it quickly in your head is divide your cpm bid by 10 times the displayed ctr
so say the displayed ctr is a .3 and the cpm bid is 0.50. Move the digit over to the right one place on the ctr and discover quickly that click costs (cpc) are 0.5 / 3 or around 0.17 .
To me this is easier than expressing the cpm as a percentage (dividing by 100) and then multiplying by 1000 (number of impressions). Maybe not a lot easier but its pretty fast to remember to move the digit right one on ctr and divide cpm by that number.
That should say “easier than expressing the ctr as a percentage”, not “expressing cpm as a percentage”