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For marketers whose goal is, first and foremost, to get the brand seen by as many people as possible, CPM may be the ideal way to do that. So what does CPM stand for? How can you use it to get the most out of it? Continue reading to learn more.
CPM stands for Cost Per Mille. “Mille” is the Latin word for “thousand.” Therefore, CPM is also often called Cost Per Thousand. The name represents the exact cost for an advertiser to pay for every 1000 impressions- that is, an ad that has been served or displayed to a user.
Imagine you run a social media ad with a $200 budget and set it to CPM. If your ad achieves 50,000 views, that means the Cost Per Mille for your ad is set at $4 for every thousand times your ad is displayed to potential customers.
The formula for CPM is (Total Advertising Cost ÷ Total Impressions) x 1,000. So, from the example above, the CPM is ($200 ÷ 50,000) x1,000, which equals 4.
Another example is: let’s say you invest $2,000 in an online video and it reaches 300,000 views. The cost per mille would be ($2,000 ÷ 300,000) x 1,000, equaling a CPM of $6,6.
A CPM is a useful metric to evaluate the price of delivering impressions. It allows marketers to make direct apples-to-apples comparisons between different ad campaigns. This lets you review each campaign type and adjust based on what works and what doesn’t.
At its core, CPM tells you exactly how much it costs to get your brand in front of eyes, regardless of whether the users take further action. This becomes an effective tool for brand awareness campaigns where the goal is just to get people to be familiar with your name, as opposed to taking action.
If you’re testing ads through different platforms, such as a print magazine, social media advertising, or a YouTube video ad, you can directly compare how much each platform costs to deliver 1,000 impressions. As a result, a clear side-by-side comparison can help you understand which platforms offer the most exposure for your investment.
When managing a business budget, predictability is ideal. A CPM helps create a steady way of forecasting your upcoming ad expenses. Because many ad networks allow you to buy inventory at a fixed CPM rate, you can easily map out exactly how many people will see your message before you ever spend a single dime.
By using CPM estimates, marketers can plan their budgets and set realistic expectations for the number of impressions their campaigns may generate.
There is no single, definitive baseline for a “good” CPM. Each business has its own type of media, industry and target audience. What is affordable for one business might be too expensive for another. Your baseline cost depends on your particular business niche, time, and how narrow your target audience is.
A low cost per mille may fit your marketing budget. However, it does not necessarily mean it is better, especially with regard to visibility. A very low rate usually means the ad is shown to a broad audience or low-quality websites. As a result, the ads might be shown to users who have no interest in the product, wasting advertising dollars.
Instead of focusing solely on the cost of impressions, balance the strategy by evaluating the quality and intent of the target audience. Paying a premium CPM for a highly targeted audience may be worthwhile if those impressions are more relevant to your business goals than a large number of cheaper, less-targeted impressions.
Your target audience is one of the biggest factors in determining CPM. A narrow, well-defined target audience costs more because many advertisers are actively competing for their attention. On the other hand, aiming for a broad, general audience keeps your prices down since there is an abundance of available ad space and far less competition.
Your physical location changes the price tag on your ads just as much as your audience filters. Running campaigns in massive metropolitan areas naturally costs a lot more than targeting rural towns, especially when dozens of brands are actively fighting over the same high-income city neighborhoods.
When hundreds of businesses are all bidding to show their ads to the exact same group of people at the same time, the price goes up. If you are trying to break into a super competitive market, you can expect to pay a premium. But if you can find a unique angle or a quieter sub-market with fewer competitors, your costs will drop instantly.
The type of advertising, including how it is designed and where it is placed, has a direct impact on the CPM price. Simple text ads with few images usually cost less than HD video ads or interactive media, where the message becomes more attractive and is likely to attract more attention. For example, spots in highly visible areas of the webpage (e.g. those that show up right when the page opens) are typically more expensive because they offer more exposure.
When you advertise also influences price. For example, in busy seasons such as Christmas holidays, black friday, or back-to-school weeks, businesses flood the ad space networks, driving the level of competition up and the price. With so many advertisers competing for customers, the cost per mille will spike as well.
A cheaper CPM means you are paying less for views, but it does not mean your ad campaign is actually working. You still need to look at whether you are reaching the right people, where your ads are showing up, and if anyone is actually buying your product.
CPM measures the cost of impressions. CPC measures the cost of clicks.
No. CPM and similar cost-per-thousand measurements can help advertisers evaluate audience exposure across multiple media channels.
Helps advertisers evaluate the cost of reaching audiences. Provides one way to compare advertising opportunities. Should be considered alongside campaign goals and other performance metrics.
