How Cost-per-Click (CPC) Ads Compete with Cost-per-Thousand-Impressions (CPM) Ads on Google Display Network
How do cost-per-click (CPC) ads compete with cost-per-thousand-impressions (CPM) ads on the google display network?
To compete, cost-per-thousand-impressions ads are converted with the click-through-rate into a cost-per-click number. These cost-per-click equivalents are submitted to the Google Display Network auction and bid on automatically by client's budgets and algorithms to be displayed on the ad network.
Answer:
Cost-per-click (CPC) ads and cost-per-thousand-impressions (CPM) ads are two common pricing models used in online advertising, particularly on the Google Display Network. A question often asked is how these two types of ads compete with each other on the platform.
Cost-per-click (CPC) ads are priced based on the number of clicks they receive, meaning advertisers pay each time a user clicks on their ad. On the other hand, cost-per-thousand-impressions (CPM) ads are priced based on the number of impressions, or views, they generate.
When it comes to competing on the Google Display Network, where both CPC and CPM ads can appear, there is a mechanism in place to ensure fair competition between the two types of ads. To allow for comparison and fair competition, CPM ads are converted into a cost-per-click equivalent using the click-through-rate (CTR) of the ad.
The CTR is a metric that measures the percentage of users who click on an ad after seeing it. By multiplying the CTR by the CPM price, the CPM ads are converted into a cost-per-click number. These cost-per-click equivalents are then entered into the Google Display Network auction alongside traditional CPC bids.
During the auction process, the CPC and CPM bids are automatically compared by the Google Display Network's algorithms, taking into account factors such as advertiser budgets and ad relevance. The ad placements are then awarded based on a combination of bid amount, ad quality, and other factors.
This system allows advertisers using both CPC and CPM pricing models to compete fairly for ad placements on the Google Display Network. The ads that provide the best value to both users and advertisers are more likely to be shown, regardless of whether they are CPC or CPM ads.