There are three main bidding options available for AdWords advertising. They are as follows:
CPC Cost per click (CPC) is the default bidding option for all PPC platforms. In a CPC strategy, the advertiser pays the search engine a certain amount of money each time an ad is clicked. The advertiser pays only when their ad generates a click—unlike a CPM relationship, in which an advertiser has to pay whenever ads are shown. CPC is the main strategy used in this book.
CPA Cost per acquisition, or cost per action (CPA), is the default cost structure of affiliate advertising. In a CPA structure, the advertiser pays only when an end user performs a specific conversion action (for example, the user makes a purchase or submits a lead form). CPA is the default bidding option when Google Conversion Optimizer is being used.
CPM CPM stands for cost per thousand (the M stands for 1,000). It is the traditional cost structure for radio and other offline media buys. CPM has been the norm when buying display banners from many prominent site publishers and advertising networks. In a CPM relationship, the advertiser pays a certain amount of money for each 1,000 impressions. For example, if an advertiser pays a $3 CPM, they are responsible for $3 if the publisher shows that advertiser’s ad 1,000 times, $6 for 2,000 impressions, and $3,000 for 1 million impressions. Of the three most common cost structures (CPM, CPC, and CPA), CPM favors the publisher the most and shifts the majority of the risk to the advertiser. Remember, the advertiser must pay whether or not there is a click, let alone a sale or other action.
Google offers all three of these bid options. Most campaigns are either CPC or CPM. All search campaigns start with the CPC bidding strategy. Advertisers tell Google they are willing to pay a certain amount per click (for CPC bids), and Google can charge any amount of money up to, but not exceeding, the advertiser’s maximum CPC. For content campaigns, advertisers can select CPC or CPM bidding. When bidding a CPM campaign, advertisers agree to pay Google a maximum amount per thousand impressions, and Google may charge up to, but not in excess of, that advertiser’s maximum CPM bid.
A compelling bidding strategy in AdWords is Conversion Optimizer. Conversion Optimizer is Google’s implementation of automated bid management, automatically controlling bid prices at optimal levels to maximize conversions while maintaining conversion costs at target levels.
To adjust your bidding option, go to your campaign’s settings and click the Edit link next to your current bidding option. When you click Edit, you will see the bidding options for clicks, conversions, or impressions, as shown in Figure 4.25. Remember, CPM bidding is available only on the content network.