Glossary | A | Advertising Pricing Models
What kind of advertising pricing models are there?
There are multiple advertising pricing models in use today. Here is an overview of the most common types:
- CPM: Also known as “cost per mille,” CPM is the price that advertisers pay for every 1,000 ad impressions that an app developer delivers inside their app (Mille is French for 1,000).
- eCPM: Similar to CPM, eCPM stands for “effective cost per mille,” and is largely used by app developers to understand the average CPM that their app is generating across a specific period of time. For example, over the course of a month, App A might display thousands of ads at CPMs ranging from $0.50 to $5 each. The app’s eCPM is the average value of those many ad campaigns, to arrive at a single number—for example, an eCPM for the month of $2.15.
- CPC: “Cost per click” goes beyond ad impressions, and instead pays an app developer every time a person clicks on the ad in question.
- CPA and CPI: “Cost per action” and “cost per installation” are similar to one another, in that an advertiser agrees to pay a publisher for specific actions that people take when they see the advertiser’s ad—in the case of CPI, installing another app, or in the case of CPA, signing up for a newsletter, buying something online, or similar.
Advertisers use CPM, CPC, CPA and CPI pricing models in support of specific advertising campaign goals.
For example, an advertiser running a national brand awareness campaign for a widely available retail product might choose a CPM model, where they can get their ad in front of millions of people at once.
On the other end of the spectrum, a new streaming video app might instead opt for a CPI pricing model and pay a relatively high price per installation, because they know that their average user will subscribe to the app for an extended period of time, allowing them to recoup their cost of user acquisition.