CPM measures the cost of an advertisement per 1,000 online advertising impressions. An impression is when the ad is displayed on a web page. The CPM model is usually used as a metric in advertising bidding systems for internet marketing. These systems use CPM to indicate the costs of advertising for the advertiser, per thousand people who are exposed to their message. For example, if a CPM price is set at $5.00, the advertiser needs to pay $5.00 for every thousand impressions of their ad.
You can use an online CPM calculator to figure it out, or just grab a regular calculator. Since CPM is measured per thousand, the CPM formula to calculate it is simple: CPM = (Ad Spend / Ad Impressions) * 1000
CPM is a digital marketing term that stands for cost-per-mille, or cost-per-thousand. Mille is the Latin word for thousand, which is why thousand is represented by "M" in Roman numerals. It is the cost to reach 1,000 visitors, readers, viewers, or listeners for an advertising campaign.
CPM and CPT are sometimes used to refer to the same thing: cost-per-mille or cost-per-thousand. However, some people define CPT as "cost per thousand unique views," meaning each view has to be from a unique device (computer or mobile phone). CPM does not refer to unique views, meaning some impressions are likely repeat views from the same potential consumer. CPT can also mean cost-per-time, a cost metric used when an advertiser pays to display an ad for a set amount of time. Because there are multiple possible meanings for CPT, it's less confusing to refer to CPM when you mean cost-per-mille or cost-per-thousand.
The acronym eCPM stands for effective cost-per-mille, and it's a measurement of how much publishers earn from their advertisement units. The formula is: eCPM = (Total Ad Earnings / Number of Impressions) * 1000
RPM stands for revenue-per-mille and represents an ad publisher's estimated earnings per 1,000 impressions. It's an estimation of how much the publisher will receive, while CPM is an ad pricing model for the advertising cost. These terms are often used interchangeably. RPM differs from eCPM because eCPM is how much publishers actually earn, while RPM is an estimate of potential earnings.
CPM is often measured by the click-through rate (CTR). In digital marketing, the CTR is the number of clicks received in relation to the total amount of impressions on the ad. If an ad gains thirty clicks per every thousand impressions, then the click-through rate is three percent. When measuring the success of a CPM ad campaign, you must use more measurements than CTR alone. Just because an ad is not clicked on, it does not mean it did not have an impact on the viewer.
If you are working on marketing campaigns, especially awareness marketing campaigns, you need to know your numbers and understand cost, campaign budget, and your cost-per-impression to make informed business decisions that will help you achieve your campaign goals.
CPC or cost per click is when advertisers pay only if the viewer clicks on the ad. Predominantly, CPC is used for promotion of a very specific product to a niche market. Similarly, CPA or cost per acquisition is when advertisers pay only when the viewer makes a purchase of the product or service that can be directly traced back to the advertisement. Having a high click-through rate is an important factor for CPA and CPC as the goal is to have the viewer purchase your product or service.
CPM is a little different in the sense that CTR does not matter as much. Brand awareness and delivering a direct message are the main targets of cost-per-mille impression ad campaigns. Even though the visitors may not click on the ad, it is still gaining exposure and promoting a specific message on high traffic websites. Cost-per-thousand impressions are appealing to website publishers because they just have to display the ads to get paid. However, since the rates of CPM are very low, it is also ideal for advertisers to increase brand awareness and send a specific message while keeping it cost-effective.
An impression is when an advertisement is displayed on a web page and a page view is when a user visits a website page, but the number of impressions doesn't always match the number of page views. For example, if the user visits a page that displays the same ad twice in different locations on the page, it counts as two impressions but one page view.
It's understandable that you want to know if you're getting a good CPM rate, but it's hard to pinpoint a "typical" CPM for a few reasons. First, there are a wide range of factors that affect CPM pricing methods, from the country you're targeting to the topic and quality of the sites where your advertisement will appear. These influential factors can cause the CPM to vary widely, so there's no standard, across-the-board cost. CPM can also be affected by the season—for example, there's a slump in CPM prices in January when consumers have spending fatigue after the holiday season.
Secondly, what qualifies as a good CPM changes depending on your CPM advertising tactics and campaign goals. Contextual targeting methods will probably result in a lower CPM for example, but you'll have lower performance results from your CPM campaign when it comes to engagement goals. That may be just fine if you're more interested in raising brand awareness at this point than running a conversion-oriented campaign.
From an advertiser's perspective, it makes sense that the less money you have to pay to advertise, the better. However, CPM is a bit more complex and lower rates aren't always preferable for a digital advertising marketer because a low CPM can indicate poor quality ad traffic. But, while higher CPM tends to be a positive indicator, it needs to be contrasted with other data to truly understand if a rate is cost-effective.
There are so many factors that affect average CPM prices for a CPM marketing campaign, from the device the ad is being viewed on to the time of year, it's difficult to list them all. However, they tend to be broken up into four broad categories that can help us better understand the many factors that are influential over CPM ads.
Context applies to factors such as the quality of the ad space, the intent of the audience, and the depth of the visitor session on the site. Audience intent relates to where a potential buyer is in the marketing funnel. For example, a site with reviews or price comparisons for any given item will be browsed by people who have pretty much made up their minds to buy the item, while an announcement about a new item on the market may get passing interest from many people who have no intention of buying. An audience that is closer to making a purchase decision is more valuable, and will result in a higher CPM.
Social media advertising can be affected by multiple contextual factors such as quality of ad space and visitor depth, because users often spend much longer on social media sites. That's why a Facebook ad or Youtube CPM for monetized playback can be higher than a non-social site. LinkedIn commands the highest CPM among social media sites because it's much more focused on a niche audience.
Factors such as the country your target audience is located in and the device they're viewing the ad on—desktop computer or mobile—relate back to the audience category. Geography makes a difference in multiple ways because it impacts the spending power of individuals and how advanced the online advertising industry is in that region. Audiences in English-speaking nations tend to command the highest CPM rates.
The type of device the audience is likely to view a site on matters because of how user experience and interactions vary across device types. Mobile use is on the rise, but consumers are still far more likely to complete a purchase on a desktop computer. That could be influenced by factors such as screen size, limited data, and connection speed. Therefore, advertising to desktop users will result in a higher CPM. Mobile can also be divided into groups based on the type of mobile device—for example, advertisers may have to pay more to target Apple users who are more likely to have ample disposable income.
CPM is also influenced by on-page elements such as the ad viewability and ad placement. That doesn't necessarily mean the display ad has to be at the top of the page—the best position is the place where a viewer is most likely to linger. According to Google, ads are "counted as 'viewable' when 50 percent of your ad shows on screen for one second or longer." The ad size matters as well—bigger is generally more expensive—along with the ad format. A video advertisement or advertisement with animation is more likely to attract attention, but publishers don't really want their audience to stop paying attention to their content and get distracted by the ad, so flashier formats raise the advertising campaign costs.
Surely the weather doesn't affect CPM, right? Well, actually... it kind of does. One influential environmental factor is the season, depending on the type of service or consumer product that is being advertised. Retail goods have a higher CPM during the gift-buying season at the end of the year, while the CPM for items such as outdoor sports equipment will increase in warm weather seasons.
Other environmental factors include the economic outlook in the targeted region, or even what's currently going on in the news cycle. A depressed economy lowers the confidence of a business in their ability to make sales, and will cause the CPM to decrease—of course, the opposite is true as well.
In general, a CPM campaign is best used to increase brand awareness and interest among consumers who are high up in the marketing funnel and therefore farther away from making a purchase decision. If an advertiser is promoting a specific product to a niche audience and is more interested in sales conversions and a high CTR, then CPC or CTA advertising will probably make more sense because they only need to pay for clicks or actual purchases of the product.
We hope you found this resource and our definition of CPM useful to help you better understand and measure your ad performance. Be sure to check all your metrics and use your data and marketing insights to evaluate what placements and platform has the greatest influence on your customer acquisition and revenue.