What is CPM in Marketing?

Definitions of CPM are trending. Why? Not really sure. But here’s a quick overview of CPM in advertising.

 

CPM = Cost Per Mille (not mile)

Cost Per Mille (or cost per one thousand). M is the roman numeral to represent 1000 and pronounced as “mill” in English, or more like “meal” in French. In advertising, cost per mille represents an advertiser paying a specific dollar amount per 1000 views or impressions.

What is an impression?

An impression represents any time someone views an advertisement; so one view = one impression.

 

History of CPM

CPM (cost per thousand impressions) was one of the first measurements for ad success. As large firms began launching websites in the mid-to-late 1990’s, they would serve banner advertisements that were paid for by advertisers based on CPM. So everyone was quickly jumping into the online scene and paying a fee to diplay a banner ad per thousand views  – check out a fun article on study.com that details initial banner ads on the internet.

 

CPM vs. CPA vs. CPC

Speaking of digital ad banners, CPM is a metric used less and less by advertisers in paid advertising. Why? It’s a bit hard to measure the end-of-funnel ROI (or ROAS = Return on Ad Spend). There’s where CPA and CPC come into play.

What is CPA in marketing?

CPA stands for Cost Per Acquisition (or some marketers also refer to this as Cost Per Action). CPA is a broken down cost of the fee it takes to close a client. CPA ad structures are popular in B2B paid advertising. For example, think of a large dump truck from CAT! It might take 250,000 views of an advertisement before one of those views commits to buying just one CAT dump truck. Those dump trucks cost $10million+ each. If those 250,000 views for 1 purchased truck cost $25,000 dollars, your CPA is $25,000 to get one CAT purchased.

What is CPC in marketing?

CPC stands for Cost-Per-Click (also referred to as Pay-Per-Click traffic). If CPM is a cost method of the number of views/impressions, and CPA is a cost method based on how many views eventually lead to a purchase, CPC is in between. CPC is the cost method to the advertiser for the click in between the view and the purchase. The CPC fee model for advertisers is the most common in digital marketing.

 

CPM for Brand Awareness

CPM is a great fee structure to maximize brand awareness. It’s generally a great way to maximize dollars to build brand awareness with specific, targeted digital publishers. For example, if Intel or AMD want to advertise a new processor, they may run a CPM fee structure for a display campaign that only runs on tech sites like PC Magazine, AnandTech, or Toms Hardware… The goal is to get in front of as many eyeballs as possible, not necessarily push prospects through a funnel.

 

CPM for Content Creators

We always pick on mommy blogs. But if you’re a content creator on youtube, tiktok, instagram, or have a more traditional mommy blog, you can earn money by running ads on your content. Google AdSense is probably still considered the most popular ad serving platform for creator’s websites. This allows you to serve other people’s ads on your site (curated by you), thus allowing the creator to make money on a CPM basis for the ads running on your site. So if you’re posting a recipe for Halloween 2022 and your bat wing cupcake recipe goes viral, Google will pay you to run ads on your recipe page (you turn all that viral traffic into an income source). Every one thousand views will pay you a certain amount!

 

How to calculate CPM (in advertising)

If a company wanted to place an ad on a website and the CPM was $10, it would cost the company $10 to deliver the ad to 1,000 people. If the ad was displayed to 50,000 people, the cost would be $50.

To calculate CPM, divide the total cost of the ad campaign by the number of impressions in thousands, and then multiply by 1,000. For example, if a business pays $500 for an ad campaign that generates 50,000 impressions, its CPM would be calculated as follows:

$500 / (50,000 / 1,000) = $10 CPM

 

And THAT is what CPM is in the marketing world. It’s not the most used cost method since the early days of the internet, but it still has an important place in the paid advertising ecosystem.

 

As always, if you need help with a CPM-based, brand awareness campaign, we’re your go-to team; reach out!