November 8th, 2007
The End of CPM Ads
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Google AdWords now allows CPC (cost per click) bids for Google content network ad campaigns (Inside AdWords) –
With the launch of cost-per-click (CPC) bidding, advertisers can now choose the bidding option that best matches their needs. If the purpose of your placement-targeted campaign is to increase sales, leads, sign-ups, or other conversion-oriented metrics, you can select CPC bidding and pay when users click on your ads. If you want to maximize impressions and increase brand awareness among your target audience, you can select cost-per-impression (CPM) bidding.
I have always looked at CPM bidding as a relic from traditional media which has wriggled its way into digital media. I think yesterday’s announcement marks the beginning of the end of CPM ads.
I think CPM ads still hold some value. Just because you haven’t clicked on an ad doesn’t mean it hasn’t registered with you. CPM ads, IMO work best on niche high-traffic blogs. E.g. movie ads on a movie review blog.
[Reply]
@Patrix — I’m happy with the idea of brand-building by getting more people to see my ads, as long as I’m not paying for it. If I run a CPC ad instead of a CPM ad, you will still see it, but I won’t pay for it. Works brilliantly for me, as an advertiser, doesn’t it?
[Reply]
Sorry if this question sounds basic, but I am not sure I follow your statement “If I run a CPI ad instead of a CPM ad, you will still see it, but I won’t pay for it.”.
I agree with Patrix; there will always be a market for ‘passive’ advertising, even in the online world - the kind that requires no action on part of the viewer.
BPSK
[Reply]
@BPSK: Corrected my comment — “If I run a CPC ad instead of a CPM ad, you will still see it, but I won’t pay for it. Works brilliantly for me, as an advertiser, doesn’t it?”
Does it make sense now?
[Reply]
Yes, absolutely. So that does appear to be a loophole. However if you look at the Adwords FAQ, (http://adwords.google.com/support/bin/answer.py?answer=56282) it says
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Is there a minimum price when bidding CPC for placement targeting?
Yes. With CPC pricing, ads have a minimum bid of $0.01 per click. With CPM pricing, the minimum bid remains $0.25 per thousand impressions.
===
Assume the minimum bid amounts ($0.01 vs $0.0025) as the example case. If an advertiser is interested in the ‘free’ impressions and decides to go the CPC route, and more than 1 person in 40 clicks on the ad, he would be spending more on the CPC than on the CPM.
1 in 40 translates to a 2.5% click-through percentage.
Seems a risky bet to take if all you are interested in is ‘eyeballs’.
BPSK
[Reply]
@BPSK: Very valid point, except that, with CPC, a marketer would typically target clicks, but also get views for free. Also, CTRs for ads on Google content network are usually in the range of 1% to 2%, so even marketers who are basically looking for free views, will probably do better than break even.
I maintain that this is beginning of the end of CPM ads.
[Reply]