CPM measures the cost of an online ad per 1000 impressions. An impression is when the ad is displayed on a web page. CPM is usually used in bidding systems. These systems use CPM to indicate how much the ad will cost for every thousand people exposed. For example, if a CPM price is set at $3.00, the advertiser needs to pay $3.00 for every thousand impressions of their ad.
CPM stands for Cost-Per-Thousand. The "M" represents the Roman numeral for 1,000. It is the cost to reach 1,000 visitors, readers, viewers or listeners for an advertising campaign.
CPM is often measured by the click-through rate (CTR). 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, does not mean it did not have an impact on the viewer.
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 bit 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 thousand 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 is 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 to advertisers to increase brand awareness and send a specific message in a cost-effective way.