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When is the switch from CPC to CPM profitable for conversions ?

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# 1
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Hello all !

 

I want to establish a guide for people who look to achive a profit by switching from CPC to CPM for a placement in the GDN .These are my questions  :

 

1) Do you make a switch only when a placement has run on CPC for a while and it has many clicks per 1000 impressions ? What numbers do motivate you to perform a switch, 10 clicks per 1000 imp , 20, 50 clicks and why ?

 

2) Does a minimum bid for CPM provide the same traffic for a placement as the previous CPC bid ? And if not, why ? How do you adjust the CPM bid to get the same number of clicks but at a lower price than CPC bidding ?

I know the help file recommends a slightly higher CPM bid than the CPC bid but that just means that you are willing to pay for 1000 imp. a littler higher than for 1 click. 

 

3) Did you experience an Avg. Pos. of always 1 if you bid on CPM on a placement as opposed to a variable position if you bid by CPC ?

 

4) Did you experience the same number of conversions if you switch a placement for CPM bidding instead of CPC ?

 

5) When you switch to CPM bidding do you only get the "left overs" from all the impressions on a placement ? I mean does it automatically get a low priority after the CPC bidders and this generates a drastic drop in clicks ?

 

Please do not quote from the help file with a generic answer that "CPM is only for branding", that line has been overused without any financial justification in my opinion. This is like answering "because" at a random question. I am looking here for feedback from people who actually have attempted such an experiment and have succeded or failed and have data to share.

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Accepted by topic author Adrian B
September 2015

Re: When is the switch from CPC to CPM profitable for conversions ?

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# 8
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I thought we had addressed this simple question - yes - CPM is a guarantee of position 1 - it just doesn't mean the same thing as position 1 for CPC.... for the reasons Jon outlined.

Here's the thing - as Jon explained - your effective CPM on the CPC campaign was $3.50. If you were to bid $3.50 on your CPM campaign you'd probably get similar click rates because you'd win the "better" auctions.

Remember, not all placements are equal. In the same way, an impression at 4am is not the same as an impression at 4pm - there are many factors to take into account.

Finally, let me address your 3rd point above - CPM is useful for branding simply because it gets the name "out there" - this makes sense if you consider this....

If I set a bid of $10CPM then I know I will get 1,000 impressions for my $10. No idea how many clicks that will generate - it may be a few it may be lots... could be none.

If I set a CPC bid of $1 and my CTR is 20% (just to make it easy for me to do the math!) then I will get 10 clicks from only 50 impressions. Very few people have seen my ad so there has been good visitor traffic (who wouldn't like a 20% CTR?) but practically no branding.

As you suggest this all needs to be tested. And things such as VTC suddenly start to come into play (for me, one of the few times I can see a value to them).

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Re: When is the switch from CPC to CPM profitable for conversions ?

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# 2
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Hi Adrian,

 

I'm not a big user of the CPM campaigns as generally I've found them to perform worse than my CPC campaigns but I do have a really positive experience with CPM that worked and was effective. To what degree, it's hard to tell and I'll explain a bit more.

 

I was running campaigns for a large food franchise in AUS and they were opening new stores every couple of weeks in new locations. They are a well known brand and not many people haven't at least walked past their stores before.

 

When a new store opened we ran CPM banner ads with ads using this type of message;

 

"Just Opened, 21 example street, 50% off first week specials"

 

We set quite a small location radius around the store and really didn't mind what sites the ads were on, we just wanted people to know we had a new store open.

 

It was all about maximizing the local ad exposure and the feedback from the client was positive. Measuring the success was a bit tricky but client said that the new store openings got more successful and busy after we launched these campaigns.

 

To answer No 5: Google turns your CPC bid into an eCPM (effective cost per thousand) so they compete on a level so you don't get the "left overs" ;-)

 

Happy to answer any questions you have mate.

Re: When is the switch from CPC to CPM profitable for conversions ?

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# 3
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Excellent example on when to use a CPM campaign. I am currently testing it on placements that had 0.5 % CTR AKA 5 clicks per 1000 imp each at almost 0.7 $ . But at a CPM bid of 1 $ per 1000 imp. after a week they do not generate clicks at all. 

 

I agree with the answer on no.5 but my impression is that CPM bidding is not only a bidding choice, it changes the campaign performance regarding clicks and conversions completely.

 

How about Q no 3 ) If you look now at your CPM campaigns and the Avg. Pos. column, do you see that the position was always 1 ? Can you speculate on why that is and why does it not generate more clicks than a CPC bid situation when the avg. pos. was 4 or 5 on the same placement ?

Re: When is the switch from CPC to CPM profitable for conversions ?

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# 4
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Ding dong Smiley Happy Any news about the avg. pos = 1 for all cpm campaigns ?

Re: When is the switch from CPC to CPM profitable for conversions ?

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# 5
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I suspect that this is similar to the image ads issue. Since text ads on the GDN will appear within box units they either appear or they don't - there are not 10 ranked positions.

This is why image ads are all 1 - if they appear in the slot they are the only one in the slot.

The thing to bear in mind here is that you should pay close attention to impression share. You might be happy thinking that you are doing well by getting the #1 slot all the time with your image ads - but in fact you might only be appearing on 5% of the available publisher inventory... an increase in your bids will likely improve the number of impressions.

Re: When is the switch from CPC to CPM profitable for conversions ?

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# 6
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Hi Adrian, I'm not sure I agree with your assessment that CPC and CPM have different performance profiles as such, it's more an issue with pricing and competition, as Steve has suggested.  CPC and CPM Ads compete for the same auctions, using "effective CPM" so your example below:

 

"Excellent example on when to use a CPM campaign. I am currently testing it on placements that had 0.5 % CTR AKA 5 clicks per 1000 imp each at almost 0.7 $ . But at a CPM bid of 1 $ per 1000 imp. after a week they do not generate clicks at all. "

 

actually makes sense.  If you had 5 clicks at $0.7 in 1000 impressions, that's an effective CPM of around $3.50 so it's not surprising you didn't get any clicks in a week bidding only $1 CPM.  It's not just a case of expecting there to be fewer clicks, you're competing in an auction and with such a low CPM bid you're probably losing all the auctions and not appearing at all - or appearing infrequently.

 

Just as with CPC on Search, the relationship between bid/position and CTR/clicks is not linear, it depends hugely upon impression share, as Steve has suggested.  If you have a 100% impression share you can be confident you're getting as many clicks as you can.  If you have only a 50% impression share you very unlikely to be getting 50% of the possible clicks because not everyone clicks an impression.  As an absurd example, if you only show your Ad 50% of the time, it's possible that you only show the Ad to people who will not click; the lower the CTR, the more important the impression share becomes.

 

As Adam has shown, the choice between CPC and CPM is much more about the intent behind the advertising rather than the cost.  If you were to change a GDN Campaign from CPC to CPM, and you used appropriate CPM values based upon the "Avg.CPM" column in the interface, you should find little difference in performance.  CPM is primarily useful when branding a product or store using a fixed budget because you can positively define how much X impressions are going to cost you.  If you are at all concerned about the number of visitors to a site, or their sales, then the model should always be CPC.

 

Jon

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Re: When is the switch from CPC to CPM profitable for conversions ?

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# 7
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Thank you for the info :

 

1) I do not agree with the effective CPM bid. If a placement has very few clicks in a CPC bidding campaign. Let's say that it has 1 click of 0.5 $ for every 10.000 impression ( very often for gmail.com placement ) , the eCPM here is bellow the minimum allowed by the network of 0.75 $ it is 0.05 $. I cannot choose the eCPM all the time.

 

I also have an experiment with bids over the eCPM value and nothing good happened, the clicks were far less than in a CPC bid.

 

2) I compared a 1 on 1 impressions share from 2 gmail.com campaigns both using a small set of identical keywords. The Campaigns did run at the same time, one CPC other CPM, the CPM with a minimum bid has a Display Impressions share of 40% and an avg. pos. of 1 and the CPC bid campaign has a Display Impression share of 16% and an avg. pos of 4.1 .

 

So a greater impression share and 2 clicks for the CPM campaign while the CPC campaign , same targeting, 25 clicks. Why is that ?

 

Why do you all (3 responders to this thread) avoid to answer a simple question : is a CPM campaign a guarantee for an avg. pos of always 1 ? It is a simple 1 minute observation IF you have a CPM campaign in your accounts ?

 

3) I do not agree with the choice of CPM based on the intent to save money for impressions, as you put it "CPM is primarily useful when branding a product or store using a fixed budget because you can positively define how much X impressions are going to cost you." .

 

I say if you do not test a placement first with a CPC bid, you can positively waste money by bidding CPM on it.

 

Because the CPM has a minimum bidding limit 75 time higer than the minimum 1 cent CPC bidding ( 75 times more expensive minimum bid in case the readers missed this part) , I find CPM bidding to be the wrong choice for some placements like gmail.com where the eCPM is lower than 0.75 $ when you start testing that placement with a CPC bid. 

Marked as Best Answer.
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Accepted by topic author Adrian B
September 2015

Re: When is the switch from CPC to CPM profitable for conversions ?

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# 8
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I thought we had addressed this simple question - yes - CPM is a guarantee of position 1 - it just doesn't mean the same thing as position 1 for CPC.... for the reasons Jon outlined.

Here's the thing - as Jon explained - your effective CPM on the CPC campaign was $3.50. If you were to bid $3.50 on your CPM campaign you'd probably get similar click rates because you'd win the "better" auctions.

Remember, not all placements are equal. In the same way, an impression at 4am is not the same as an impression at 4pm - there are many factors to take into account.

Finally, let me address your 3rd point above - CPM is useful for branding simply because it gets the name "out there" - this makes sense if you consider this....

If I set a bid of $10CPM then I know I will get 1,000 impressions for my $10. No idea how many clicks that will generate - it may be a few it may be lots... could be none.

If I set a CPC bid of $1 and my CTR is 20% (just to make it easy for me to do the math!) then I will get 10 clicks from only 50 impressions. Very few people have seen my ad so there has been good visitor traffic (who wouldn't like a 20% CTR?) but practically no branding.

As you suggest this all needs to be tested. And things such as VTC suddenly start to come into play (for me, one of the few times I can see a value to them).

Re: When is the switch from CPC to CPM profitable for conversions ?

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# 9
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Good , thank you very much for explaining . At least I understood one thing about the avg. pos. = 1

 

 I think this behaves just like Ad slot position 1 in the search, it implies a higher impression share also , at least that is what I have seen in the CPM tests.

 

The story you tell does not make sense for me because I know the average CTR from display campaigns. These are 0.1 % , I think I also read about it in some google documentation 1 % for the search and 0.1% for the Display and also 0.1% CTR for the search partners .

 

At below 0.1 % CTR , the eCPM becomes lower than the CPC bid, and it is a good choice to start CPM bidding unless that eCPM is higher than the minimum CPM bid of 0.75 $.

This is why CPM is a tempting choice for many placements EVEN FOR BRANDING , but when I test it,  it seems that it doesn't bring the same amount of clicks , and it is definitely not better than CPC for conversions.

 

So if I bid 1 $ per click at a 0.1 CTR the eCPM is also 1 $ per 1000 impressions. But for 0.05 % CTR the eCPM becomes 0.5 $ and it starts making financial sense to switch to the CPM bidding IF ONLY CPM bidding would be a bidding choice and it didn't change the number of clicks and conversions.

 

My main point is that CPM bidding is not only a bidding choice, it influences CTR and conversions , no matter how much you bid . By bidding on CPM I have only experienced less clicks.

 

Thank you all for the input, If you do not mind I will choose Steve's answer as a solution at least because he made it clear that the avg. pos. for a CPM campaign is 1 , I think this influences the high exposure of the Ads because I have seen a greater Display Impressions Share for the CPM campaign.

 

I believe this is the end of this thread.

Re: When is the switch from CPC to CPM profitable for conversions ?

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# 10
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Hi Adrian,

 

As Steve has pointed out, you really cannot ever directly compare two Campaigns because you cannot run them at exactly the same time, showing on the same pages, to the same user.  CPM and CPC are fundamentally different strategies; one is based upon a target of a specified cost per click and the other on a specified cost per 1000 impressions.  Although you can make comparisons, because each CPC Campaign has an effective CPM and each CPM Campaign has an effective CPC, and although Google uses those calculated value for CPC and CPM Ads to compete in the same auctions, that doesn't mean the two are directly comparable over time and performance.

 

Consider a very simple situation.  One Campaign is CPC, and I set a daily budget of $50 and a max CPC of $2.  In this situation, Google will attempt to show my Ad at an impression rate that gets me 25 clicks or so in a day.  I have no idea how many impressions that might be, it could be only 10% of those available, or it could be 100% of those available.  The point is that I've effectively "asked for" 25 clicks.

 

Another Campaign is set to CPM and uses one Ad.  I set the same daily budget of $50 but this time I specify a max CPM of $10.  Here Google will attempt to give my Ad 5000 impressions in a day.  I have no idea how many clicks I'll receive - they're irrelevant - because I'm asking for impressions, not clicks.  

 

The two Campaigns can be compared in terms of their effective CPCs and CPMs, but their intent is different and they're treated differently by Google.  CPM Ads can be shown in situations where clicks are unlikely, because the focus is on impressions - you've told AdWords clicks are irrelevant.  CPC Ad impressions do consider the likelihood of a click, because that's the focus of that strategy.  This is why CPM Campaigns are typically used for branding, because the intent is impressions, not clicks, the advertiser is only concerned with showing their Ad and generating awareness, not on generating clicks to their website.

 

The choice between CPC and CPM is primarily about intent, not cost but you have to examine the results of tests.  There's no magical formula that says when you reach X impressions for Y cost then you should switch to CPM (or CPC) because the intent from AdWords changes.

 

Jon

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