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Advertising compensation methods: CPC, CPA, CPM, CPL, and CPI

Online advertising can be intimidating if you don’t understand different advertising compensation methods and how they are calculated. Here is a quick guide on the most popular methods:

Cost-per-click (CPC)

  • Used to calculate the cost per click (e.g. Google AdWords) 
  • CPC = Advertising Cost / Number of Ad Clicks 
  • Example: $2,000 / 80 = $25 (cost-per-click)

Cost-per-acquisition (CPA) 

  • Used to calculate clicks, online sales, form submissions, signups, registrations, etc.
  • CPA = Cost / Acquisitions 
  • Example: $4,000 (advertising cost) / 250 (newsletter signups) = $16 (cost-per-acquisition)

Cost-per-mille (CPM)

  • Cost per 1,000 Ad impressions. Used to calculate and compare advertising performance
  • CPM =  (advertising cost / impressions generated) x 1,000 
  • Example: $10,000 (advertising cost) / 500,000 (estimated impressions/audience) = 0.002 x 1,000 = $2

Cost-per-lead (CPL)

  • Used to calculate the number of leads generated by an advertising campaign
  • CPL = advertising cost / number of leads
  • Examples: $1,500 (advertising cost) / 120 (leads) = $12.50

Cost-per-installation (CPI)

  • Cost per installed app. Often used in mobile app advertising
  • CPI: advertising cost / number of installations
  • Examples: $6,000 (advertising cost) / 300 (app installations) = $20

Irrespective of the marketing channel (search engine, email, social media, display ads, mobile ads, etc.), a good understanding of different advertising compensation methods is essential in growing your business with online advertising. 

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