CPM: Cost Per Mille

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Definition

Cost per mille (CPM), more commonly known as cost per thousand, is a term used in digital marketing to describe the cost of an advertisement that is viewed a thousand times. In simple terms, it shows how much an advertiser pays for every thousand impressions that their ad receives. This can provide an indicator as to how much awareness and exposure their ad is generating for the website.

This tool is most commonly used in online display advertising on platforms like Google Ads, Facebook Ads, and other social media networks. It is particularly valuable for building brand awareness and improving the size of the audiences reached. The ultimate goal, with CPM, is to maximise visibility.

Quick Access

How is CPM Calculated?

CPM is a simple pricing model calculated using a very easy formula. All you require is some basic data like the total cost of the advertising campaign and the total amount of impressions that were made on this campaign. Divide the former by the latter and multiply by 1000 to get your CPM.

Here is a worked-out example of how to calculate CPM. You are running an advertising campaign that costs €8000. You receive 1,000,000 impressions on this particular advertisement. Your calculated CPM is:

This means that for every 1000 views your advertisement receives on the website, you are paying €8. A simple formula like CPM makes it very easy for an advertiser to compare the costs of different campaigns, and prioritise ads that may need some extra work.

Understanding CPM vs Other Advertising Metrics

CPM vs CPA

CPM and CPA are both online advertising models but with 2 different objectives. As we know, CPM centres its focus on maximising visibility for a campaign. This improves brand awareness and campaigns oriented around views. But, it can’t guarantee clicks.

However, Cost Per Acquisition (CPA) is a performance-based tool. Advertisements will only incur costs when an action has been carried out with their campaign. For example, a purchase on a website, signing up for a newsletter or downloading a mobile app. CPA focuses on the final results. It can help you understand how to improve your conversion rates and how effective your campaign is.

CPM vs CPC

Cost Per Click (CPC) is another well-known pricing model used in digital marketing. Again, whilst CPM’s goal is to drive up visibility rates, CPC focuses on how many clicks the ad gets. Spending here is linked to user engagement with the campaign. CPC is most commonly used when an advertiser is looking to increase conversion rates and organic traffic landing on the website.

	CPM	CPA	CPC
Definition	Cost per thousand views of an ad	Cost per action made with an ad	Cost per click of an ad
Payment Basis	Per thousand ad impressions	When a specific action is completed	Per ad click
Goal	Increase brand awareness and maximise visibility	Increase conversions with the campaign	Increase number of clicks on the ad and website traffic
Use Case	Display advertising	E-commerce	Social media campaigns

Ways to Improve Your CPM

To reduce the cost of your advertising campaigns, whilst also increasing the number of impressions that they receive, it is important to consistently optimise your content and your campaign.

Target Audience: There is no gain in having lots of impressions if they are targeted at the wrong audience. Define your target audience by focusing on demographic, geographic, and behavioural factors. Targeting a high-value audience will result in more impressions and more clicks.
High-Quality Advertisement Investment: It is essential that your ad attracts and retains user attention. Improve conversion rates by using an ad creative that is high in quality, with clear and concise information, but also engaging. Testing a few different options will help to choose which ad will provide the best performance.
Utilise Frequency Capping: When running online advertising campaigns, you run the risk of wasting impressions on users who have already seen the ad. This can result in saturation and a disengaged audience and will drive up your CPM. Implement frequency capping to improve the effectiveness of your campaign and keep the price of your CPM down.
Timing of Ads: Ensure that you are correctly placing your ads at the right time. Don’t neglect seasonality. Having an ad live for flip-flops in the middle of winter is not going to perform well. Be strategic about your timing.
A/B Test: An easy but effective way to improve your CPM is to use the A/B test. This will help you understand what format results in the best performance. Testing things like format, headings, visuals and messages will provide you with some answers.

What defines a good CPM?

CPM varies from campaign to campaign. All factors must be considered, like the content of the campaign and the objectives. However, in general, the lower the CPM, the better it is. Low CPM = low cost for the advertiser. But, this does not always mean that your campaign is successful. It is important to have a balance between the cost of the campaign and the number of impressions received. It may be more beneficial for your campaign to have a higher cost with greater engagement from the audience.

CPM Strengths and Weaknesses

Strengths

Simple Metric: CPM is an easy tool to use with a simple formula. This simplicity allows advertisers to easily understand and compare different campaigns they have. Budget planning and spending tracking are easy to conduct with CPM.
Low-Cost: When compared with other tools like CPC and CPA, CPM is one of the models with the lowest costs. They are also very predictable and can be adjusted accordingly, to maximise visibility, before launching a new campaign.
Works for Multiple Platforms: CPM can be used across a variety of different advertising platforms like Google Ads, Facebook Ads and TikTok Ads. This offers a versatile way to reach a broad audience via multiple channels.

Weaknesses

No Guaranteed Conversions: CPM only targets impressions on a campaign. Advertisers are paying for a tool that only measures the number of views their ad gets. There is no guarantee that these impressions will result in engagement or clicks.
Reaching Wrong Audience: You may have a good CPM (low-cost) but this does not automatically indicate campaign advertisement success. CPM only takes into account the number of impressions and not who the impressions are.
Variation of Performance: External factors can have a huge impact on a CPM campaign. Holiday seasons, social media trends or even weather changes can affect your campaign and make it irrelevant.

Conclusion

CPM is a useful pricing model to help drive impressions for your advertisement campaign. It is simple but effective in working to increase brand awareness for you and maximise the visibility of your ad. It is the simplest pricing model compared to others like CPC and CPA. Like any tool, it has both strengths and weaknesses, but it can be improved using just a few simple tactics.

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