What’s the difference between CPM, CPC and CPV bidding?
There is an important distinction between “bidding strategy” (how the bidding model of the platform behaves) and “billing method” (how the platform charges you).
The billing method is how you’ll have to pay the platform. For example CPM billing means how much you’ll pay for each 1000-impressions they help you generate. Likewise clicks for CPC and views for CPV.
The bidding strategy is the specification of what the AI of that respective platform will optimize towards. For example CPM bidding means optimizing for lowest cost-per-thousand-impressions, likewise clicks for CPC and views for CPV bidding.
Much has been said about billing methods, so in this article I’d like to clarify how “bidding” (how the bidding model of the platform behaves) works:
The difference between CPM, CPC and CPV bidding is how you want your campaign/ad set to behave.
To start you need to know this:
- Different campaign goals will dictate which sort of bidding to choose. So what is your goal?
- How the bidding model works: Most advertising platforms will have an “AI” that helps them determine who do I bid for and how much do I bid, this is called the “bidding model” of the platform (eg. Facebook, Google, etc). The main function of this model is: Given the budget and the goal of my campaign, every time I see a new user (incoming traffic), should I place a bid? And how much should I bid?
Now the reason that you can choose CPM, CPC and CPV bidding on Facebook/Google is because each one of these “models” behave slightly differently (meaning they will choose different users and bid differently).
CPM bidding
You should choose this sort of bidding if your wish for users to see your ad and gain mindshare without the user taking the action immediately. Think movie ads or branding ads. With CPM bidding the model needs to determine how much it is willing to bid for this user in order to gain an impression. This is the easiest bidding type among all bidding models because most of the time with a high enough price the bid will be won and ads will be shown, so the challenge for the model is to balance its budget with how much this impression will cost and determine how much it is willing to place the bid.
CPC bidding
You should choose CPC bidding if you want users to click your ad to get to a landing page or product page. This is suitable for EC advertisers or advertisers trying to get leads. With this bidding the bidding model will choose the users that will most likely click. As you can imagine this is harder than CPM bidding because it also needs to account for how likely this user will click on the ad. This bidding model will need to figure out the best price it is willing to pay for based on the likelihood of this user clicking the ad.
CPV bidding
You should choose CPV bidding if you want users to view your video ads. This is suitable if your advertising creative is a video format, and you wish users to watch your video either completely or to a certain degree. In this type of bidding the bidding model will need to figure out whether or not the user will watch the video ad, the difficulty level is similar to CPC bidding as the model needs to predetermine the likelihood of the user completing the view and more difficult than CPM bidding. Again the model will determine the best price to bid for this user given the likelihood of the user completing the view.
In conclusion:
There’s a vast difference between how the AI of the advertising platform behaves based on the bidding strategy that you choose, and since this will greatly impact your advertising campaign, be wise and know what your goal is before you start!
