Cost per click (CPC) is a method of charging advertisers for the user clicks their advertisements have received.
Cost per click is the going method for charging for targeted advertising, such as search ads, while cost per impression (CPM) is largely associated to branding advertisements, such as banner ads. Cost per acquisition (CPA) charges only for users who have committed a transaction or conversion.
CPM, or cost per thousand impressions, is the marketing world’s metric for judging the merits of different media buys.
Offline, CPM is calculated by taking the total cost of a given ad buy, dividing it by the total estimated viewership of a given advertisement, and multiplying the total by 1000. Here’s an example: You buy a magazine ad for US $5,000. The magazine’s subscriber base is 50,000. Therefore, the CPM will be ($5,000/50,000) x 1,000, or $100.
On the Web, CPM is a little different. Since it’s so difficult to accurately determine the total number of visitors to a website, the CPM is calculated using the number of actual ads served. The distinction is subtle, but critically important: in the offline world, marketers simply guess how many times an ad is seen, whereas on the Web, we know.
Creatives refer to an advertisements text or copy.
Advertising people are funny. They call magazines “books,” television “broadcast,” and advertisements “creative.” While the idea of calling ads “creative” may vary from ludicrously hopeful to woefully inadequate, when someone from the advertising world tells you they’ve been doing some great creative lately, what they really mean is “ads.”
On the Web, direct response usually refers to a clickthrough on an ad banner.
Many advertisers will audit the effectiveness of a campaign based on the number or percentage of direct responses. While this can lead to the hard-bargain, cost-per-click deals that almost entirely ignore the branding value of web advertising, evaluating response is often the best way to an honest audit of the product, advertising message, and ad placement.