In this article, you’ll learn what affiliate terms CPC, CPM, EPC, CR, CPL, CPO mean and how different they are from each other.
In affiliate marketing, like in any other professional industry, there are specific terms and slang expressions. They are actively used by webmasters themselves, and they can be frequently found in case studies, articles and reviews; they facilitate the interaction of specialists. Therefore, it is crucial to know them and understand them correctly.
Most frequently, newcomer affiliates choose affiliate programs with the CPA (cost per action) pricing model. In this case, you need to acquire a potential customer and encourage them to make a certain action (to buy a product, to order a service, to install a game, etc.) to make money. It may sound simple, but when choosing this operation model, a newcomer suddenly encounters a variety of unfamiliar abbreviations: CPM, CPC, EPC, CR, etc. Without understanding these terms it is extremely difficult to work with an offer, evaluate traffic statistics or communicate with the program managers.
Which abbreviations should one learn before driving traffic to make money? Let’s figure out the main terms in practice.
What is CPC
The term CPC (Cost Per Click) is quite simple to understand: it means cost per click. That is the amount of money charged for every click of a user on a banner or advertisement. CPC allows evaluating the efficiency of an advertising campaign, namely figuring out the conversion rate and adjusting bids.
This index is calculated by the following formula:
CPC = Advertising expenditures / The number of website visits.
This index is influenced by a variety of factors: starting from an advertisement or a banner and ending with the quality of a landing page.
There is also a term CPC network. These are different systems offering advertisers and webmasters a partnership by the Cost Per Click model.
Meaning of the CPM abbreviation
CPM (Cost Per Mille) is a quantitative index which reflects the cost of showing ads to 1 000 users. That is, this is an amount of money for 1 000 advertising impressions.
This term came from the print and media advertising industry. Today it is extremely important when planning a campaign and defining the effectiveness of an advertising platform.
This index is calculated by a very simple formula:
CPM = Cost of advertising placement / Target audience volume * 1000.
That is, if a website owner is asking 2000 rubles daily for placing a banner, but can only ensure 10000 advertisement impressions, then CPM equals 200 rubles.
The term EPC
Now let’s figure out what the abbreviation EPC means. The abbreviation stands for Earnings Per Click, that is, an indicator of the average income per click. This indicator is very important for working with CPA-networks, as it allows you to find out the level of income. The feature of the EPC is that the term only takes revenues into account, but does not take into account expenses, so you will need to consider both indicators to calculate the total profit.
Earnings Per Click are calculated by a special formula:
EPC = Earnings / Clicks.
The EPC is frequently considered when choosing an offer or evaluating the efficiency of traffic arbitrage. In the first case, you need to drive some traffic to the offer to be able to evaluate the EPC and the cost per click. If the cost per click is higher than earnings per click, then this offer is lossmaking and you should not choose that offer. In the second case, you need to calculate average earnings from one click and compare them to the average value of the whole affiliate program. If the EPC is below the average value, then you should look for the new sources of traffic or readjust the advertising campaign.
Meaning of the CR abbreviation
Let’s move on to the next term, CR (Conversion Rate). It is used to indicate the conversion rate of an offer. The index is calculated in percentages and it allows to determine how many conversions were made by 1000 people. In no way should you confuse this term with the CTR (click-through rate)!
To calculate the index, the following formula is used:
CR = Total visitors count / Conversions count * 100%.
CR is an indicator of the offer profitability, however, it is not always objective as it depends on the sample of users for calculation.
When the term CPO is used
CPO or Cost Per Order is the cost of a purchase. This term indicates the effectiveness of an advertising campaign and is characterized by a ratio of expenditures and the number of purchases.
This index is calculated by the following formula:
CPO = Advertising expenditures / The number of goods sold.
As a result, you can figure out the advertising profitability: if advertising expenditures exceed average order value, then your campaign is inefficient and you need to reconsider it.
What does CPL mean
CPA networks often propose CPL (stands for Cost Per Lead) offers to webmasters. The main difference is that a webmaster is paid per leads whereas in CPA offers they are almost always paid for redeemed orders or services. In CPL, it suffices to get any information about the user: phone number, email address, etc. This is necessary for an advertiser to create a database that will be used for telephone marketing and emails.
CPL networks are frequently used by beginner affiliates as they allow to acquire more traffic and the process is much easier. Normally, gambling, dating, and adult offers are working by this model.
There are certainly more terms in affiliate marketing, but for a start, it will be enough to understand these abbreviations.