CPC, CPM, CPA, CAC, AND MORE!

How to Make Sense of CPC, CPM, CPA, CAC, etc.

If you are new to these metrics or are looking for a refresher I will try and get at the "why" behind these metrics. I'll also list out what these mean and how they are calculated.

First off, in principle, there are a few things to note about these metrics:

• They are "calculated metrics" which means they are not stand-alone numbers - each one has its own formula, which I have listed below in the glossary.

• They are standard negotiations between publishers and advertisers.

• They are metrics that represent a business model or a funnel.

Now that we have got a few of the basic things out of the way let's cover why they are important. These metrics represent the relationship between a publisher and an advertiser. You could also say they are "agreements" between the two parties. Publishers are the one who owns the real estate, content, or place in which the advertiser wants to put their ad. A few examples of publishers are Google, Facebook, Yahoo, and so forth. You could also be a website, for example, if Mother.ly was selling an advertising slot on their website they would be the publisher. The advertiser can be individuals, brands, businesses, products, or anyone who wants their advertisement listed on a publisher’s platform. The party we haven't listed here is the underlying driver who adds value to the equation for both parties, and that is the user. Meaning you and me! We are the reason these agreements exist. 

The most common agreement we see online today is CPC. Very practically if I click on an advertisement on Google then the advertiser, in this case, Amazon.com, will pay Google some agreed price for my click on that first link.