Google has two payment models for your Adwords advertising on Google’s content network. The more popular method of CPC is where you pay each time your ad is clicked on. With CPM advertising you pay for each 1000 impressions your ad receives. You are not charged extra for click-through.

CPC: The Adwords cost-per click or pay-per-click model is where you pay when your ad receives a click. These ads appear on both the search engine results pages (SERPs) and on independent web pages (content network).

CPM: The Adwords cost-per-thousand-impressions model only appears on web pages that allow Google Adsense advertising (Content Network). A CPM ad is larger. It is an expanded text ad or image ad and it occupies the entire ad space.

CPM advertising is effective as a branding ad where you are trying to create awareness for your company, brand or products. Google allows advertisers to target which websites they want to be included in (or excluded from). CPM ads use competitive bidding with minimums starting at $.25 per M impressions. Focusing on ad design is critical with CPM to encourage a higher click through rate.

CPC advertising is pure performance based advertising where you only pay when someone clicks through to your website or landing page. Results are very trackable with analytics. CPC ads are the only option available if you want your ad to appear along with Google’s search results. CPC ads require a bid of at least US$0.01 per click.

Advertisers should test out both methods and see which gives the lowest cost per conversion. Many CPM advertisers are able to lower advertising costs and increase their sales revenue with well optimized ads.