Digital publishers need to constantly seek out effective strategies to maximize their revenue and reach a wider audience. Cost per mille (CPM), or cost per thousand, is one of several pricing methods that enables publishers to gauge the success of ad campaigns and optimize their monetization strategies.
While the digital ad space has boomed over the years, with more than 5 billion internet users worldwide and more than 2.14 billion eCommerce shoppers, economic uncertainty means publishers need to constantly stay up to date on the advertising landscape to stay ahead of their competitors.
CPM is a term commonly used in digital marketing and advertising and refers to the price an advertiser pays for every 1,000 impressions their ad receives. CPM is widely used in digital advertising to assess the effectiveness and efficiency of ad campaigns.
Let's take a deep dive into some questions surrounding CPM marketing—What is CPM? What is the CPM pricing model? And how can the CPM metric can be used to optimize display ad campaigns?
What is CPM?
CPM is used to calculate the price advertisers pay for every 1,000 impressions their ad receives on a web page. It’s a metric that’s commonly used in campaigns intended to reach audiences that consist of thousands of individuals.
In CPM campaigns, an impression occurs every time an ad is successfully displayed to the target audience.
Key Takeaways on CPM
- CPM stands for cost per mille, which means the cost of reaching 1,000 people with an ad.
- CPM is one way to set the price for online ads, along with cost per click (CPC) and cost per action (CPA).
- It’s important to note that CPM measures the cost of impressions, not the actions or conversions the ad generates.
- CPM is often used in display ads, which are ads shown on websites, mobile apps, or other digital platforms.
- CPM is a common metric used in advertising to understand the cost-effectiveness of campaigns.
- Some drawbacks of CPM are inaccurate impression counts owing to duplicate views, ads that don't load properly, and advertising fraud.
How Does CPM Work?
Advertisers use CPM to estimate the total ad spend required to reach their target audience and evaluate the performance of their ad campaigns. It helps measure brand recognition, social targeting, and the potential impact of CPM ads.
This pricing model is prevalent across various ad networks, including Google Display Network (GDN), and allows advertisers to bid on ad space based on CPM rates. Advertisers can then implement specific CPM strategies and allocate their total ad spend effectively. Even when different metrics are targeted for optimization, most Facebook campaigns still operate on a CPM pricing structure.
Other metrics to evaluate the performance of a CPM campaign include eCPM (effective CPM), rCPM (revenue CPM), and vCPM (viewable CPM).
How to Calculate CPM?
To calculate CPM, simply divide the ad spend by the number of impressions multiplied by 1,000.
The CPM formula is:
CPM = Ad spend/impressions * 1,000
CPM has been one of several industry standard pricing methods for determining advertising costs and pricing web ads since the early days of online marketing campaigns.
While campaign analysts and strategists now have a wealth of data and metrics available to measure total impressions—digital views, user engagement, and ad effectiveness—the industry standard CPM still has many benefits for advertisers looking to track their ad impressions.
For advertisers with a focus on brand visibility and brand awareness, a CPM digital marketing campaign is a common method of raising a brand's profile. Furthermore, it isn’t just a case of how many times their ads are successfully displayed, but also approximately how many ad views they received on any given web page.
For example, one strategy that works well for companies new to the market is to run a CPM campaign across several websites on both desktop and mobile devices. By driving a large number of views or impressions the company is able to build brand visibility .
What Is a Good CPM?
The answer to this question will almost always be a subjective one. Analyzing past campaigns, benchmarking results against market averages, and evaluating the impact of CPM on ROI can help determine whether a campaign’s CPM was good or not.
A lower CPM is not always a positive indicator for an advertiser, as the sheer size of the audience may indicate its poor quality. At the same time, higher CPM rates may lead to unsold advertising inventory for publishers.
CPM Vs CPC Campaigns: Which Is Better?
CPM and CPC are two common pricing models used in digital marketing campaigns. Each model has its own advantages and can be more suitable depending on the specific goals and objectives of an advertising campaign.
CPM campaigns rely on ad impressions, with advertisers paying for every 1,000 served impressions. The predetermined CPM allows for budget estimation and reaching a specific audience size. This strategy maximizes exposure regardless of click-through rates (CTRs) or the number of clicks.
CPC campaigns, on the other hand, are based on the number of clicks an ad receives. Advertisers are only charged when users click their ads, making CPC effective for driving traffic and generating conversions. This model suits businesses prioritizing direct response and measurable outcomes.
CPM and CPC campaign cost-effectiveness largely depends on the campaign goals and the specific industry. CPM campaigns can be more cost-effective when the target CPM (the maximum amount an advertiser is willing to pay per thousand impressions) is low and when high CPM ad networks are avoided. CPC campaigns can be more cost-effective when the target audience is highly targeted, and the CTR is high.
The choice between CPM and CPC campaigns depends on the campaign goals and the desired outcomes. CPM campaigns are more suitable for brand awareness and reaching a wider audience, while CPC campaigns are effective for driving traffic and generating conversions.
How to Optimize Your CPM Campaign
Once publishers and advertising professionals understand the definition of CPM, they can begin working towards the best CPM possible.
Here are our top tips for campaigns.
1. Choose an Ad Network
There are a range of ad networks available that can be used to leverage CPM strategies, including Google AdSense, Criteo and SmartyAds, to name just a few.
For small companies new to display advertising it can be somewhat overwhelming to know where to start, or even if running ads on a CPM basis is the right choice. While monitoring CPM rates will help you assess the performance of your ad inventory and take action to optimize your revenue streams, it's essential to understand what influences CPM rates and the seasonality of these changes.
Each publisher will have to consider different factors to determine a reasonable CPM rate for their ads.
The Publift team are experts at CPM advertising and can advise you on the best ad format, placement and pricing methods for your campaigns and change them as and when needed.
For more on other pricing methods for your ads, check out our guide to CPC, CPA, and CTR.
2. Prepare for Seasonal Variations
It's important to know when to expect seasonal variations in CPM rates so you can better benchmark your performance and forecast future revenue. Look at past data and see where you tend to see dips in your CPM. Think about your industry from a buyer's perspective.
If you run a dating website, then February will be a big month for you as advertisers will heavily increase spending around Valentine's Day. If you run a personal finance website or health and fitness blog, then the January Blues may be your pot of gold as consumers rush to your websites to kick start their health and wealth New Year's resolutions.
Knowing when to expect these fluctuations while working with the CPM model will prevent you from getting caught off guard when a drop comes rolling along and help you plan cash flow around these times. We would suggest not making any dramatic changes during a slump and use the time to work on upcoming content to take advantage when advertisers are buying big. If you need to do any testing on your site, the first month of the quarter is a good time.
The last month of the quarter, Black Friday, and Christmas periods, are not a good time for a site redesign to go live or to run another testing that may affect the site. Our account managers at Publift are experts in anticipating trends and building these into your ad management, so you don't have to worry about it.
3. Place Your Inventory on a Supply Side Platform
In order to try to generate higher CPMs, you can place inventory on a supply-side platform (SSP) to open your ad inventory to more advertisers. If you have a niche audience or a high-quality website, more competition for your ads will increase the CPMs.
Another action you can take is to test and experiment with ad formats and ad placements to increase ad viewability.
You can also focus on fill rate. Even with a lower cost per thousand, you can increase overall earnings by improving the fill rate of your ad placements.
Benefits of Using CPM in Marketing
Here are some of key benefits of using CPM in marketing:
- Cost Efficiency: With CPM advertising, you only pay for impressions, not clicks or conversions. It offers a predictable and often lower cost compared to other digital marketing strategies such as CPC or CPA.
- Increased Brand Awareness: CPM campaigns can help boost brand visibility and awareness by reaching a wider audience. Since you pay for impressions, your ads are displayed to a larger number of people, potentially increasing the exposure of your brand and message. This is particularly useful for companies aiming to increase brand recognition or introduce new products or services.
- Effective for Video Ads: CPM is an excellent choice for running video ads. Video content has become increasingly popular, and CPM allows you to showcase your videos to a large number of viewers. Whether it's pre-roll or in-stream video ads, CPM ensures that your videos are seen by users, helping you convey your message more effectively and engage with your target audience.
- Measurable Results: CPM campaigns provide valuable data and metrics that allow you to measure the effectiveness of your ads. You can track impressions, clicks, CTRs, conversions, and other key performance indicators. By analyzing this data, you can optimize your CPM strategy, make informed decisions, and improve the overall performance of your digital marketing efforts.
Final Thoughts
As with all strategies in marketing, CPM strategies require constant testing and analysis to determine what works. At Publift we take the heavy lifting out of CPM marketing, driving high traffic and maximizing impressions.
Publift helps digital publishers get the most out of the ads on their websites. Publift has helped its clients realize an average 55% uplift in ad revenue since 2015, through the use of cutting-edge programmatic advertising technology paired with impartial and ethical guidance.
If you’re making more than $2,000 in monthly ad revenue, contact us today to learn more about how Publift can help increase your ad revenue and best optimize the ad space available on your website or app.
CPM FAQ
1. What Is an Ad Impression?
An ad impression occurs whenever an ad is displayed to a website visitor or app user.
2. What Is a Good CPM for Display Ads?
Determining whether a CPM is good or bad will depend heavily on individual business objectives. For example, higher CPMs could lead to unfilled impressions, while lower CPMs could be the result of poor quality traffic.
3. How Do You Choose the Right Online Advertising Pricing Model?
Choosing the right online advertising pricing model largely depends on goals, niche and audience. CPM is a low risk for publishers, while offering limited outcomes for advertisers at a low cost. The opposite is true for CPA, where publishers carry greater risk but can charge a premium for doing so.
4. How Does Traffic Seasonality Influence CPM?
Traffic seasonality can affect how many people visit a site and how many impressions ads receive. A common example is a dating site. When Valentine's Day nears then the number of users that visit the site increases, raising CPMs.
5. How Do You Forecast Impressions?
Software such as Google Ad Manager (GAM) can forecast traffic and impressions to a site. When forecasting impressions, it is ideal to factor in traffic seasonality.