Bidding Models in Programmatic Media Buying: CPM, CPC, and CPA Explained

Programmatic media buying operates with a variety of cost models, each offering distinct ways to pay for ad placements. In this article, we’ll explore these models, dive into how bidding works, and discuss how Bigger Picture Solutions takes on the financial risk to deliver results that matter.

This is part of our ongoing series of articles on programmatic media buying, where we aim to debunk myths and share insights. Check out the previous articles:

Cost Models in Affiliate Marketing

Affiliate marketing and programmatic media buying use several cost models:

CPM (Cost Per Mille): Paying for every 1,000 ad impressions, regardless of clicks or conversions. Best for building brand awareness.
CPC (Cost Per Click): Paying for each click on your ad, without guaranteeing conversions. Often used for traffic-driving campaigns.
CPA (Cost Per Acquisition): Paying only when a specific action (sale, lead, or other conversion) is achieved. Ideal for performance-based campaigns.
Commission/Revenue Share: Paying a percentage of the revenue generated through affiliate links. Common in affiliate marketing programs.
CPI (Cost Per Install): Paying for app installations, a model used by mobile-focused campaigns.
CPL (Cost Per Lead): Paying for each lead generated, often used in B2B campaigns.
CPS (Cost Per Sale): Paying for completed purchases, directly tying payment to results.

While CPM and CPC models dominate traditional media buying, CPA models shine in performance-based affiliate marketing, ensuring brands pay only for measurable outcomes.

What is Bidding in Media Buying?

Bidding is at the core of programmatic media buying. It’s how advertisers compete for ad placements in real time. When opening a campaign, advertisers:

Define their targeting criteria (audience demographics, geos, devices, etc.).
Add their campaign or tracking URL to measure results.
Set a bid amount—the maximum price they’re willing to pay for impressions, clicks, or actions.

The bid determines whether your campaign will win ad placements from publishers.

What is a Floor Rate?

Publishers set a floor rate, which is the minimum price they are willing to accept for their inventory.

When your bid is equal to or higher than the floor rate, your campaign can access that publisher’s traffic. If it’s lower, your ad won’t show. This is why understanding floor rates and bidding dynamics is essential for successful campaigns.

First-Price vs. Second-Price Auctions

In programmatic advertising, ad placements are awarded through auctions. The two main types are:

First-Price Auction: The highest bidder pays exactly what they bid for the ad placement. This can drive up costs but offers guaranteed visibility.
Second-Price Auction: The highest bidder pays slightly more than the second-highest bid (e.g., $0.01 more). This method encourages competitive bidding while keeping costs manageable.

Knowing which auction type is used on your DSP (Demand-Side Platform) can help you optimize your bidding strategy.

How Traffic is Bought in Programmatic Media Buying

Programmatic platforms like DSPs automatically buy traffic in real time by matching your targeting and bid to available inventory. This process involves:

Bidding for impressions or clicks through auctions.
Competing with other advertisers targeting the same audiences.
Winning better placements (e.g., top of the page) when you bid higher.

Higher bids typically result in:

More traffic.
Better placements within the publisher’s website.
Faster scaling.

However, higher bids also mean higher costs, which is why setting clear KPIs is vital.

The Typical Agency Model vs. Bigger Picture Solutions

Most agencies working on programmatic media buying charge clients based on media spend. They might:

Take a percentage of the ad spend as their fee.
Operate on CPC or CPM models, where the client bears the cost of traffic, regardless of results.

At Bigger Picture Solutions, we do things differently:

CPA-Based Models Only: We work on a performance basis (CPA, CPS, CPL, or commission). Brands only pay for results, not for traffic or media spend.
Risk Is on Us: We cover all media buying costs upfront, assuming the risk of campaigns that may not convert.
Why We Succeed: With years of experience and our proprietary optimization tool, we excel at managing campaigns and driving conversions efficiently.

This model allows brands to focus on growth without worrying about wasted ad spend.

Optimizations in Media Buying

Optimizing campaigns is crucial to achieving the best results. Here’s how we approach it:

Start Broad: Launch Run-of-Network (RON) campaigns to gather data from all available publishers.
Remove Underperformers: Eliminate publishers or placements that fail to meet KPIs.
Create Whitelists: Focus on high-performing publishers and open separate campaigns targeting those, with higher bids.
A/B Test Creatives: Experiment with different ad designs and messaging to find the best-performing combinations.
Adjust Targeting: Refine geos, devices, audiences, and other parameters based on data insights.
Analyze Reports Over Time: Look at long-term trends, not just short-term results.
Combine Strategies: Mix and match publishers, targetings, and creatives to uncover hidden opportunities.

Avoid Over-Optimization

Over-optimizing a campaign can be as damaging as under-optimizing. Here are some common pitfalls to avoid:

Removing Targetings Too Soon: Allow enough time to collect meaningful data before making decisions.
Focusing Too Narrowly: Don’t limit your campaign scope early on—start broad and narrow down strategically.
Losing Sight of KPIs: Keep optimization efforts aligned with your end goals (e.g., ROI, conversions, CPA).

The Bigger Picture

Bidding models are the foundation of programmatic media buying. While CPM and CPC focus on driving traffic, CPA ensures that brands only pay for measurable performance.

At Bigger Picture Solutions, we embrace the CPA model, taking on the financial risk and leveraging our expertise to deliver results. By combining data-driven optimizations and a deep understanding of programmatic dynamics, we help brands grow efficiently and effectively.

Stay tuned for the next article in our series as we continue to debunk myths about programmatic media buying and share actionable insights!