What Is CPM (Cost Per Mille, Cost Per Thousand Impressions)?

What Is CPM (Cost Per Mille, Cost Per Thousand Impressions)?

Last Updated: March 16, 2021

Cost Per Thousand or Cost Per Mille (CPM) is defined as the price of reaching one thousand impressions for your ad on a webpage.

An accurate calculation of CPM can help you understand which ads are performing well, which ads aren’t, and how you can improve your marketing outcomes. In this detailed primer, we discuss what CPM is and help you identify whether your CPM is above or below industry standards.

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What Is Cost Per Mille or CPM?

With marketers spending so actively on digital ads, it is critical to measure whether they are reaching the target audience and having the desired impacts. This is where Cost Per Thousand/Mille (CPM) comes in. It tells you how efficiently your ads are reaching your audience and whether your marketing budgets are being used optimally. In Q1 of 2018, advertisers spent an average of $2.80 per thousand impressions, according to the Google Display Network report.

So, what exactly is CPM? In the marketing lexicon, Cost Per Mille or CPM refers to the money an advertiser invests for one thousand ad views. This typically applies to display ads – banners, native advertising, etc.

Note: Mille is the Latin word for “thousand.” Therefore, Cost Per Thousand impressions is also abbreviated as CPM.

CPM is a common methodology for arriving at display ad costs that are used by both the publisher and the advertiser. For example, a website that is hosting a display ad on its inventory may want to charge a specific amount for a thousand impressions. Once this limit is reached, the advertiser or marketer is charged the predefined CPM.

On the buyer’s side, advertisers can choose to calculate their own CPM according to their marketing budgets. Let’s say you have spent $2000 on a campaign, distributed among 10 display ads across multiple websites. Each ad will bring in a specific number of impressions, and based on your total marketing investment, you can calculate your CPM. A high CPM (beyond what you expected) indicates that your ads aren’t as efficient as you’d like – you are spending more money to reach a limited audience.

This doesn’t mean that a low CPM is always preferable. If you find yourself spending too little per impression, it could mean that you’re reaching an overtly large and mostly generic audience. In that case, engagement per ad is likely to drop.

That’s why it’s crucial to understand your unique campaign goals when deciding what would be a good CPM for you. For example, if brand awareness is your primary objective, a low CPM is what you need. On the other hand, if you want tangible actions like an app download or a service registration, a relatively high CPM balanced by good quality of impressions should be your goal.

So, what are the components of your Cost Per Thousand Impressions metric?

Well, this can be broken down into two parts:

1. There is the cost of data. Every ad will utilize audience data to target a prospect or create a lookalike audience for deeper engagement. Data costs comprise a big part of CPM, as this is what makes your ad so relevant to the audience.

2. The amount you pay for the actual ad space factors in. For instance, if you have bid $0.75 for an ad in one location, the impression received from this investment contributes to the CPM. In today’s world of automated ad exchangesOpens a new window , you can run up a pretty steep ad space investment, depending on the expansiveness of your campaign.

Let us consider a scenario where you choose not to leverage audience data and simply target a specific topic. If you’re operating in the tourism industry, you might want to place an ad on websites focused on a topic like “Paris” or “vacations.” Here, you’re only paying for the ad space and your CPM will be lower as a result.

Let’s discuss what is a good CPM (and whether low is always desirable) in greater detail.

What Is a Good CPM?

CPM can vary hugely from campaign to campaign, based on the type of display adsOpens a new window you choose.

Google Display Network’s Q1 2018 report analyzed over 760 million ad impressions and three million clicks to identify CPM trends for the period. On average, advertisers spent $2.80 for every thousand impression – but this doesn’t necessarily imply a positive click-through rate (CTR). In the same period, the average CTR dropped by 23%, suggesting that advertisers might have done better to invest more on their impressions.

Global CPM costs are steadily rising, growing by 12% between Q4 2017 and Q1 2018. But engagement levels (indicated by clicks) remain low. As a marketer, pay close attention to ad placement and audience targeting to ensure that your campaigns bring in measurable returns – no matter the CPM.

Here are a few pointers to help understand whether your CPM is at an optimum:

  • As mentioned, topic or category-based ads are cheaper; but they are less likely to inspire user action. If you leverage audience data and target a contextual keyword (as opposed to only a topic), your click-through-rate could rise by three times. For example, instead of “Paris” an ad that targets “what to do in Paris during summer” will find greater engagement.
  • Native advertising is a type of display ad that blends in with the website format. If your customer, for instance, is reading an article about the top ten vacations on Huffington Post, an advertisement on vacationing outfits, how to save up for a vacation, etc., would appear natively. Native advertising has a 2 to 3 times higher click-through-rate than banner ads, but are priced at anywhere between $4 and $9.
  • Videos are the most expensive in terms of cost per thousand impressions, coming in at $10 to $15. This goes up even further for connected televisions. However, videos do bring in greater engagement.

When calculating what is a good CPM, you should take your unique campaign goals into account. If you’re planning to launch a new product, impressions may be all you need. In that case, a CPM of $3 or below is good enough.

It’s very different if you’re looking to push a product or a service. In that case, it is advisable to look at a CPM of $3.5 to $9, encouraging clicks and shares. And if you want to circulate specific marketing content like a seasonal promotion or a CSR video, you might have to go up to $20 per thousand impressions.

3 Types of CPM: vCPM, eCPM, and CPCV

cpm types

Types of CPM

If you want more visibility into marketing spends, here are three types of CPM that you should remember:

1. vCPM

vCPM or viewable CPM refers to how much an advertiser is willing to pay for actual views. Unlike regular CPM, it isn’t calculated after the campaign has been rolled out. Instead, it helps to set the minimum bid amount for display ads. For example, if an ad is placed on the publisher’s website, but the reader didn’t scroll down far enough to see it, then the advertiser doesn’t pay for the impression. Google defines an ad as “viewed” when at least 50% of the content appears for one second or more.

2. eCPM

eCPM is the effective Cost Per Mille and accounts for the revenue generation capabilities of the impression. It isn’t just enough that the ad was placed on the page (standard CPM) or even that it was viewed (vCPM). The customer must actually click on the ad and begin the revenue generation process to contribute to your eCPM. You can calculate eCPM by dividing the total revenue from clicks by the total number of impressions.

3. CPVC

CPVC or Cost Per Completed View is relevant specifically to video ads. Here, you need to pay only if the viewer has seen the entire video, and not if they dropped off half-way. Advertisers can choose to define a specific performance milestone, like 5 seconds or 10 seconds into the video. Once it crosses this milestone, the ad is considered viewed. Primarily, CPVC applies the VCPM concept to video ads instead of display ads.

Now that you know what the different types of CPM are, let’s look at the benefits of monitoring this metric.

Why You Need to Monitor CPM

cpm benefits

Benefits of a CPM

So, why does CPM continue to be an important metric when there are so many other ways to measure customer engagement? Well, there are several benefits to monitoring CPM:

1. Brand building

At the start of your marketing journey, CPM is an excellent marker of how efficiently you’re reaching your target audience and laying the foundation for conversion.

2. Target audience identification

If you find your ads receiving good engagement at a lower rate on a particular website, this could mean that it’s resonating very well with the audience.

3. Strategic reinvestment

Websites displaying a good CPM are your primary candidates for future investments, which can help make your marketing strategy less generic.

4. Overall performance

If you can link high CPM to high click-through-rates this means that your marketing campaign is doing well, and you should double down your efforts in the same direction.

If you are eager to achieve these benefits, it’s time to get started with calculating your CPM and benchmarking against campaign-specific goals.

A Quick CPM Calculator

You can measure CPM at two stages of your campaign: before you commence investment to arrive at the minimum price for impressions, or after a campaign to understand how efficiently you could reach your customers.

To measure CPM before starting a campaign, you can divide your total marketing budget by the desired number of impressions. Let’s say you have $1000 to spend on a campaign and want to reach 40,000 people. After division, you will get a result of $0.025. To calculate CPM, this is multiplied by 1000. So, your targeted CPM for this specific campaign is $25.

If you’re calculating CPM after the completion of a campaign, repeat the same formula – but with the actual number of people reached.

Learn More: What Is Programmatic Advertising? Definition, Types, Channel, and AdvantagesOpens a new window

Tips to Optimize Your CPM: The Way Forward for Marketers

cpm tips

Tips to Optimize Your CPM

There are several ways you can improve your CPM. And a better CPM means that your marketing campaign is reaching the target audience, having the desired impact, and paving the way for revenue generation.

Here are three tips that can help you achieve this:

1. DSP/SSP

Demand Side PlatformsOpens a new window and Supply Side PlatformsOpens a new window can help negotiate a smart price point for impressions. As a marketer, you can use a DSP to ensure your investments are being routed to the most effective ad publishers. You can also set a maximum bid cap so that your CPM doesn’t go beyond a specific threshold.

2. Experimental ad formats

Retire the ad formats that aren’t giving you the expected CPM. For example, it could be that readers are choosing to quickly close your interstitial ads (display ads that appear before leading to the main website), while a simple banner is getting clicks. The right ad format could significantly improve your CPM.

3. Ad placement

Where you place the ad on a website or a mobile app, has a lot to do with engagement. A video that appears unobtrusively beside an article, for instance, may receive a complete view. Try different placements to identify which leads to the best CPM.

A good CPM is the starting point of a sustainable and successful marketing strategy. We recommend that you keep impression costs well within budgets, and focus on how effectively an impression translates into conversion for a truly ROI-focused campaign.

Do you know what is a good CPM for your organization? Share your insights with us on TwitterOpens a new window , FacebookOpens a new window , and LinkedIn .Opens a new window We would love to hear from you!

Chiradeep BasuMallick
Chiradeep is a content marketing professional, a startup incubator, and a tech journalism specialist. He has over 11 years of experience in mainline advertising, marketing communications, corporate communications, and content marketing. He has worked with a number of global majors and Indian MNCs, and currently manages his content marketing startup based out of Kolkata, India. He writes extensively on areas such as IT, BFSI, healthcare, manufacturing, hospitality, and financial analysis & stock markets. He studied literature, has a degree in public relations and is an independent contributor for several leading publications.
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