MAcronyms

CPC vs CPM: Which Ad Pricing Model Should You Use?

Understand the difference between Cost Per Click (CPC) and Cost Per Mille (CPM) advertising models, when to use each, and how they affect campaign performance.

CPC CPM
Ad Space

If you have ever set up an ad campaign on Google, Facebook, or a programmatic display platform, you have encountered the choice between CPC and CPM bidding. Pick the wrong model and you could burn through your budget with nothing to show for it. Pick the right one and you stretch every dollar further. The confusion is understandable: both models determine how much you pay, but they measure completely different things. This guide breaks down exactly how CPC and CPM work, when each model makes sense, and how to avoid the most common mistakes marketers make when choosing between them.

What Is CPC (Cost Per Click)?

Cost Per Click is an advertising pricing model where you pay each time a user clicks on your ad. You are charged nothing for impressions alone — only for the action of a click.

Formula:

CPC = Total Ad Spend / Number of Clicks

For example, if you spend $500 on a campaign that generates 250 clicks, your CPC is $2.00. Platforms like Google Ads use a second-price auction system, meaning you often pay less than your maximum bid. If you set a max CPC of $3.00 and the next-highest bidder offers $1.80, you might pay $1.81.

CPC is the backbone of paid search advertising and is widely used in social media ads when the goal is driving traffic, sign-ups, or purchases.

What Is CPM (Cost Per Mille)?

Cost Per Mille — “mille” is Latin for thousand — is a pricing model where you pay a fixed rate for every 1,000 impressions your ad receives, regardless of whether anyone clicks.

Formula:

CPM = (Total Ad Spend / Number of Impressions) x 1,000

If you spend $600 and your ad is shown 200,000 times, your CPM is $3.00. This model is the standard in display advertising, video campaigns, and programmatic buying. It traces its roots back to traditional media buying, where TV and print ads were sold on a per-thousand-viewers basis.

Key Differences

FactorCPCCPM
You pay forEach clickEvery 1,000 impressions
Best forDirect response, conversionsBrand awareness, reach
Risk profileLower risk (pay only for engagement)Higher risk (pay even if no one clicks)
Budget predictabilitySpend varies with click volumeSpend varies with impression volume
Typical platformsGoogle Search Ads, Bing AdsDisplay networks, YouTube, programmatic
Average cost (cross-industry)$1.00 - $2.00 per click (Google Search)$3.00 - $10.00 per 1,000 impressions (Display)
Optimization leverAd relevance, Quality Score, landing pageCreative quality, audience targeting, placement

One critical nuance: a low CPM does not mean a campaign is cheap, and a high CPC does not mean a campaign is expensive. What matters is the downstream outcome — the cost per acquisition or the value of brand lift generated.

When to Use CPC

Choose CPC when your campaign has a clear, measurable action you want users to take:

  • Driving website traffic. You only pay when someone actually visits your site, so every dollar goes toward a real visitor.
  • Lead generation. If you are running ads to a landing page with a form, CPC ensures you are paying for people who showed interest.
  • E-commerce sales. Performance campaigns with a target cost-per-acquisition benefit from CPC because you can tie clicks directly to revenue.
  • Tight budgets. Smaller advertisers often prefer CPC because there is no spend wasted on impressions that go unnoticed.

When to Use CPM

Choose CPM when you are optimizing for visibility rather than immediate clicks:

  • Brand awareness campaigns. When launching a new product or entering a new market, you want as many eyeballs as possible. CPM lets you maximize reach.
  • Video advertising. Pre-roll and mid-roll video ads on YouTube or connected TV are typically sold on a CPM basis.
  • Retargeting at scale. If you are staying top-of-mind with an audience that already knows your brand, CPM keeps your ads in front of them efficiently.
  • High click-through-rate creatives. If your ads consistently achieve a CTR above 1-2%, CPM can actually be cheaper than CPC on a per-click basis, because you are paying a flat rate for impressions and earning more clicks within that cost.

Real-World Example

Imagine you work at a mid-size SaaS company launching a new project management tool. You have a $10,000 monthly ad budget split across two goals.

Goal 1: Drive free trial sign-ups (CPC)

You allocate $6,000 to Google Search Ads targeting keywords like “project management software free trial.” Your average CPC is $4.50, generating 1,333 clicks. With a landing page conversion rate of 8%, that produces 107 free trial sign-ups at a cost of $56.07 each.

Goal 2: Build brand recognition among tech decision-makers (CPM)

You allocate $4,000 to LinkedIn display ads targeting VP-level and director-level professionals at companies with 200+ employees. Your CPM is $12.00, buying you roughly 333,000 impressions. Those impressions generate a measured 14% lift in brand recall among your target audience in a post-campaign survey.

Both campaigns succeed — but they succeed at different things. Trying to run the brand awareness campaign on CPC would have been wasteful (low click intent on display ads means a sky-high effective CPC). Running the search campaign on CPM would have been risky (you would pay for impressions from people searching irrelevant queries who never click).

Common Mistakes

  1. Judging CPM campaigns by click-through rate. If you buy impressions for brand awareness and then panic because the CTR is 0.08%, you are measuring the wrong thing. CPM campaigns should be evaluated on reach, frequency, and brand lift.

  2. Ignoring Quality Score in CPC campaigns. On Google Ads, a low Quality Score inflates your CPC. Advertisers who focus solely on bid amounts without improving ad relevance and landing page experience routinely overpay by 50-400%.

  3. Not calculating the effective CPM of a CPC campaign (and vice versa). If your CPC campaign has a 2% CTR and you pay $1.50 per click, your effective CPM is $30.00. Compare that to a $6.00 CPM buy and you can see why awareness campaigns should not be run on CPC.

  4. Setting and forgetting. Both models require ongoing optimization. CPC campaigns need keyword pruning and negative keyword lists. CPM campaigns need frequency capping and creative refreshes to avoid ad fatigue.

Frequently Asked Questions

Can I use CPC and CPM in the same campaign?

Not within a single ad set — you choose one bidding model per campaign or ad group. But you absolutely should use both across your marketing mix. Most mature advertisers run CPM campaigns for top-of-funnel awareness and CPC campaigns for mid- and bottom-of-funnel conversion.

Which model is cheaper?

Neither is inherently cheaper. A CPM of $5.00 sounds inexpensive, but if nobody clicks, you have paid $5.00 for nothing actionable. A CPC of $8.00 sounds expensive, but if those clicks convert at 15%, each conversion costs about $53 — potentially a bargain depending on your product margin.

What is eCPM and how does it relate?

eCPM (effective CPM) is a normalized metric that converts any pricing model into a cost-per-thousand-impressions equivalent. It allows you to compare the cost efficiency of CPC and CPM campaigns on the same scale. The formula is: eCPM = (Total Spend / Impressions) x 1,000.

Do social media platforms favor one model over the other?

Meta (Facebook/Instagram) and TikTok optimize delivery differently depending on your chosen objective. If you select a traffic objective, the platform effectively operates on CPC logic. If you select a reach or awareness objective, it operates on CPM logic. The platform’s algorithm adjusts which users see your ad based on the pricing model you choose.

Sources

Ad Space