How is CPM Different from CPV in Digital Marketing?

Advertisers and digital marketers often have a hard time staying on top of search engine results. They need to take care of multiple factors, such as different performance marketing strategies and pricing models. By defining marketing objectives, advertisers determine the best approach to advertise a campaign and use appropriate performance metrics to gain more valuable insights.

Adding to your challenges, there are innumerable terms advertisers need to learn, making things overwhelming for new advertisers and small-scale businesses. However, once you grasp a basic idea of different performance marketing pricing structures, you can make smarter decisions. You can determine the best choice or strategy for your ad campaigns and adjust your bids and budget with confidence. This article discusses the major differences between the two pricing models: CPM and CPV and helps you choose the right one to maximize your results.

What is CPM?

CPM, which stands for cost per mile or the cost per thousand impressions, is a pricing model that estimates the total costs of displaying an ad to 1000 users. CPM is a great option for advertisers focusing on building brand identity, and therefore, it sits at the top of the sales funnel. In short, CPM evaluates the costs per thousand ad impressions. It can be estimated using the following formula −

CPM = (Ad Spend / Impressions) x 1000

What is CPV?

CPV determines the cost per view of a video ad running on online marketing campaigns. As the name suggests, it is the amount advertisers pay whenever a visitor watches a video ad. The CPV pricing model is popular among mobile app marketers who are running video ads to build brand awareness. In other words, CPV is used for video ads or pop-up ad campaigns and is the common choice in mobile app advertising.

To calculate CPV, use this formula −

CPV = Advertising Cots / Video Views

CPM vs. CPV Bidding Strategies

Bidding strategy is how the bidding model of your advertising platform behaves. It is the specification of what the platform’s AI will optimize towards. While CPM bidding refers to optimizing for the lowest cost-per-thousand impressions, CPV bidding will optimize toward video views.

Before discussing the differences between the two bidding models, let’s quickly understand how the bidding system works. Most advertising channels will have an AI (artificial intelligence) to help determine whom to bid for and for how much. Different campaign goals and objectives will determine the most suitable bidding strategy for you.

Deciding which bidding system to choose would also depend on the algorithms or advertising norms of the particular platform you are running your ads on, such as Google, Facebook, Instagram, YouTube, etc. Therefore, each type of bidding model, be it CPM, CPV, etc., will behave differently based on whom they choose, requiring you to bid differently in each model.

CPM Bidding

The CPM bidding model will be ideal if you want your users to see your ad and learn about an important event you are hosting, or simply know about your brand. You can choose CPM bidding if you don’t want your viewers to take immediate action, such as buying a product or service. A classic example of CPM bidding is promoting a movie or a women’s day campaign.

The CPM bidding is one of the easiest models because with a good price, the bid is won, and your ads will be shown to targeted viewers. The only challenge in this bidding model is to balance its budget by determining how much you are going to pay for a thousand impressions.

CPV Bidding

Choose a CPV bidding model if you want your target users to view your video ads. Therefore, this model will be more suitable if your ad creative is in a video format. You can either want your users to watch your video ad completely or partially. A CPV bidding model will determine the best value for a bid, depending on the user’s likelihood of watching the video entirely or partly.

Advertisers will benefit from CPV advertising because they know they can generate good views and leads from a successful video ad. Your views will act as real-time metrics to track how well your ad campaign is performing. And the best part is, you don't need to pay for anything that the viewers did not watch or if the views are not appropriately delivered to the right audience.

CPM vs. CPV: Which to Choose?

Now that the difference between the two pricing models is clear, we will discuss the right one for your ad campaigns. Summing up, using the CPM model, you can pay for every thousand views on your ad. You can choose the amount you want to pay for every 1000 impressions. Google or other search engines will charge you the amount you have decided to pay and nothing else. On the other hand, with the CPV pricing model designed for running video ads, you need to pay for every view.

Now let’s compare both models. CPM is a great choice if you only want to build your brand name rather than make your customers click on your ads to purchase products. For instance, you can use the CPM model to promote a conference or webinar you want to organize in a few days or weeks. In such cases, you don’t really want your consumers to click on your ad, and at the same time, just get your name out there. You simply want more prospects to know about your upcoming event.

Contrastingly, CPV is a better choice if you wish to promote your brand and its services. It is also helpful for building your brand awareness and getting repeat customers. For instance, if you are a restaurant or bar owner and wish to promote a special offer or an ongoing discount, such as Happy Hours or Weekends Offers, you can use CPV. While CPM allows you to tell people what you have to offer, CPV can increase your customer visit frequencies.

Key Takeaways

In conclusion, there are crucial differences between the CPM and CPV bidding models depending on how the AI of your chosen ad platform will behave and the type of strategy you choose. Whatever decision you take and whichever tactic you would implement, make your choices wisely to enhance outcomes and learn about your advertising goals before getting started.