Cost per thousand (CPM) is one type of pricing model commonly used in digital marketing. Learn how CPM works and whether it’s right for your brand.
Creating that awareness is the first step on the customer journey, which is what makes your digital marketing efforts all the more important. How you approach marketing for your business is crucial, which is why you need to consider all of the marketing strategies at your disposal and, most importantly, the cost of executing those strategies. This is where it can be helpful to familiarize yourself with what CPM is and how this pricing model is used in digital marketing.
Various forms of advertising and advertising pricing models exist. However, one of the most common pricing models in digital marketing is CPM. The acronym, CPM, stands for cost per mille, with the Latin and old French word ‘mille’ meaning a thousand. For this reason, you will often see CPM referred to as cost-per-thousand. More technically, CPM represents the cost a marketer will pay for every one thousand impressions of a digital ad.
Cost per thousand is one of the pricing models marketers and businesses can leverage in several ways. Not only is it important to understand the use cases for CPM advertising, it’s also important to understand how CPM works. CPM can be a great tool for businesses and anyone who wants to advertise their service or product.
What does CPM mean in marketing?
In digital marketing, CPM refers to what an advertiser pays for 1,000 impressions of an advertisem*nt on a web page. What is important about CPM marketing when it comes to digital marketing is understanding the meaning of an impression. An impression means the ad, as an element of a web page, loaded and received a view. This isn’t the same as a page view.
Impressions vs. page views
You can often find the terms page view and ad impressions used interchangeably. While the two are similar, they are still different metrics. A page view occurs when a web page loads on a user’s browser and that user clicks through to another page.
By contrast, an impression indicates that an element of the page, such as an ad, loaded and appeared for the user to view. Depending on the advertising platform used and options chosen by the marketer, impressions can vary a great deal.
For example, each time a new user comes to a particular page on a website, they increase the page view count by one. However, the same advertisem*nt may not show up each time for all those visits, so the impression count will not match the page view count.
Both these metrics have value for businesses and marketers. These metrics are also important for publishers who want to increase website traffic.
The importance of click-through rate (CTR)
CTR, or click-through-rate, refers to the number of clicks an advertisem*nt receives from its impressions online. The formula for CTR is the number of clicks divided by the number of impressions. Multiply the result by 100 and you will see your ad’s click-through-rate.
The CTR can tell marketers and advertisers how well or poorly an advertisem*nt performs, which is what makes this rate so important. You can use it, especially in conjunction with other metrics, to measure not just overall performance, but smaller things as well, such as copy effectiveness or if the title works well for the ad.
CTR also gives insight into how to proceed with a digital marketing campaign. For example, a very low click-through-rate can mean several things. Maybe the ad isn’t targeting the right people or perhaps the ad isn’t on the best websites or in the best position. Alternatively, the CTR can show that a targeted keyword or advertisem*nt is working and can possibly do even better.
CPM vs. other types of paid search
CPM marketing isn’t the only type of pricing method for digital advertising. Other models can work well for you and help you grow your audience, depending on your particular needs. Some models can work alongside CPM marketing rather than as an alternative. It’s a good idea to familiarize yourself with the more common pricing models and paid search methods so you can make an informed decision on which to go with.
Pay-per-click (PPC)
The PPC, or pay-per-click model, involves paying for each click-through of an ad. The pay-per-click pricing model also falls under the term CPC or cost-per-click. The two aren’t the same thing, as CPC is more of a subset or metric of an overall PPC model. So, stay cognizant of that when you see the terms used interchangeably.
In this case, you are effectively paying for a more powerful targeting algorithm. The advertising platform will want your ads clicked, so they may receive better placement. However, this can also translate to a higher cost for advertising, especially since most PPC platforms involve bidding on the ad space. So, marketers should make sure the potential gains from a click-through far outweigh the costs of the click.
The SERP page ads you see are typically of this nature, so understanding how search engines work can help with PPC advertising.
Cost per action (CPA)
CPA, or cost-per-action, is an advertising pricing model that allows marketers to pay for a specific action taken on an advertisem*nt. This model works well for businesses with a very specific marketing objective.
The term cost-per-acquisition also falls into this category. However, this really refers to a specific action. For example, a marketer can pay for every conversion, which is a level beyond an impression or a click. Some examples of actions you can pay for in a CPA model can include:
- A user registering for an event or webinar
- A user signing up for a trial or mailing list
- A user buying an item or membership
- A user completing a survey or questionnaire
- A user sharing something on social media
The CPA model can do a lot for a business and its goals. However, it’s not always the best method to start with. In some cases, it’s a good idea to start with other pricing methods to gain a better idea of what datasets will work best when choosing the actions to pay for in a CPA marketing campaign.
How do you calculate CPM?
Very simply, calculating CPM involves dividing the total cost of the CPM campaign by the number of impressions it receives. Multiply that result by 1,000 to find the CPM. You can also use an online CPM calculator to do the math for you.
What is a good CPM?
What makes a CPM a good CPM will depend on several factors, as the answer to the question is a very subjective one. A lot of those factors will depend on the goals and budget of the business running the advertisem*nt campaign.
Generally, CPM marketing is more about quality than quantity. Sometimes a cheaper CPM can seem ideal, but if those impressions don’t turn into conversions, then they’re of lesser value than a pricier CPM strategy that nets results.
A good CPM is one that helps you meet or exceed your goals. If one business pays a pittance but comes out the other side with excellent results, and another business pays a premium, but also achieves their goals, then both these businesses have found a good CPM. And that’s despite the wide disparity between the amounts they paid.
As with most advertising methods, it can take some trial and error to find what works best for you or your business. Don’t judge CPM by cost alone. Judge it by results and its ROI if you want to find a good CPM.
Benefits of using CPM
CPM strategies can offer several benefits, which is why it’s one of the most popular ad pricing methods.
Budget friendly
CPM typically weighs in as one of the least expensive options of all the advertising pricing models. Costs can vary based on several factors, but those costs tend to come in at the lower end of the pricing spectrum when compared to other forms of advertising. This makes CPM cost-effective for businesses of any size.
In addition, you only pay for a set number of impressions. You can quickly take the information gained from those impressions, finetune your ad, and launch another campaign without spending significant sums of money to do so.
Brand reach and recognition
A CPM advertisem*nt can increase the reach and visibility of your brand in several ways. Your ad will appear in front of a wide audience and they will see what your brand has to offer. After all, you’re paying for impressions, not possible impressions. Just the visibility alone can create awareness and recognition. This will help in both the short and long term, especially as you expand your efforts and learn more about what works for your business when it comes to marketing.
Lead generation
Advertising platforms that offer CPM pricing typically also offer various ways to target potential leads. This makes CPM a very cost-effective way to improve lead generation. This can become important for a business if they choose to go with a different, more narrowly targeted type of advertising campaign. By building out a repository of leads, businesses can more accurately identify their target audience and increase conversions.
Metrics
As stated, CPM allows businesses to gather a lot of relevant data for what’s typically a low cost. The data, metrics, analytics, and other information can go directly back into making the next advertising campaign that much more effective.
Many other benefits of CPM exist, but what makes this pricing method most beneficial will have to do with the goals of the business utilizing them. In addition, CPM works well as part of a larger marketing strategy, especially one that can take the benefits of CPM and leverage them in an effective way. You can test the waters with CPM to see what potential it holds for your business without spending too much in the process.
Drawbacks of using CPM
As with any marketing method, CPM advertising does have some potential drawbacks. One of the main drawbacks of CPM is the quality of the traffic it provides. You may not know exactly where a platform will place your ad. The platform itself may serve your ad to an audience that has no interest in it.
Also keep in mind that CPM offers impressions, which isn’t the same as clicks or conversions. While impressions can increase reach and awareness, they don’t always lead to action.
Another drawback comes in the form of advertising fraud. This can occur when someone attempts to artificially inflate the number of impressions on a web page in order to overcharge companies using the CPM pricing model. Advertising fraud can lead to you paying for impressions generated by bots, so make sure to work with a reputable platform when engaging in CPM marketing.
Is CPM advertising right for your business?
CPM can solve several issues for businesses struggling with marketing. This pricing method will often work best for newer or smaller businesses still trying to figure out their marketing angle.
Nevertheless, larger businesses can still benefit from CPM advertising, especially as part of a larger marketing campaign. The lower cost and barrier to entry also makes CPM ideal for businesses with a smaller marketing budget or a business still trying to figure out their marketing budget.
To figure out if CPM is right for your business, you will need to evaluate what this method can offer and if what it offers can give you an ROI that you can appreciate. Any business can try CPM, so it’s not a case of going all in on this method from the very start.
You will learn if it’s right for your business or you may realize the offerings of a different advertising pricing method would suit your business goals better. As far as small business marketing strategies go, CPM will often sit above other ad pricing schemes for the reasons previously mentioned.
Should you display ads on your website?
If you want to make a website, you will likely ask yourself whether you should display ads on your site or not. There’s no one answer to this question as it will depend on your business and your business goals. Ads can bring in revenue, but they can also distract from what you’re offering on your site.
If you do choose to place ads on your website, you might consider using the CPM pricing model to get paid. If you run a website that facilitates CPM advertising, advertisers pay you a certain amount for every 1,000 impressions. Thus, CPM marketing can potentially generate a significant amount of revenue if you run a website that gets a lot of traffic and has advertising inventory to offer.
How to run a successful CPM campaign
To run a successful cost per mille campaign, you must do your due diligence to make sure you give the campaign the best chance to work for your business. You could always start the process and let it run without a second thought, but most marketers know that any type of advertising campaign requires a bit of upfront planning. To help you get started, we’ve listed some of the steps you need to take in order to find success when using CPM.
Determine your budget and risk tolerance
Before you begin, set aside a budget for your CPM campaign. Most importantly, you should stick to that budget. Additionally, you need to assess your risk tolerance. Marketing campaigns represent an investment, and all investments come with inherent risk. Can you or your business afford to lose the amount of capital you’re budgeting for this project?
While CPM may be an effective cost strategy, those costs can begin to add up over time. If you just want to test CPM and see what to make of it, then start with a smaller budget.
Carefully time your campaign
A thousand impressions can go by quickly. You should consider exactly when you want to run your CPM advertisem*nts rather than running them the moment they’re ready. Seasonality can affect who sees your ad and who doesn’t.
Additionally, CPM rates do fluctuate and can change season by season. Rate changes can also occur around large holidays or events in specific industries.
Choose an ad platform
Choosing an ad platform can require a great deal of consideration. You’ll find there’s quite a number of dedicated advertising platforms out there, and various other platforms that also include marketing services exist.
The Google Display Network is probably the best-known platform for bidding on display ads, so creating a Google Ads account wouldn't be a bad place to start. However, if you want to communicate a specific message to a carefully targeted audience, then you should look at which advertising platforms cater most to that audience.
For example, if you want to advertise on social media rather than on websites, then check to see if the social media site offers an ad platform that includes CPM. Most social media sites do have such services, so you may find it more beneficial to use those services specifically for those platforms.
Create the ad
Create your ad and pay close attention to every element of the ad. If in doubt, research best practices for specific types of advertisem*nts and utilize them. What works best for ads in one industry may not work for ads in a different industry. Keep these things in mind when creating your ad. Your options for creating an ad can have some limits depending on the advertising platform you’re using.
Track performance
Once your ad goes live, you should pay close attention to how it performs by setting up data tracking features. A key benefit of CPM advertisem*nts is that you can collect data on your advertisem*nts quickly and learn more about what you can try with your next CPM advertisem*nts.
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Cost per mille (CPM) and other types of digital marketing strategies have grown more complicated and time-consuming over the years. Many businesses don’t want to spend an obscene amount of time learning and refining their marketing efforts when they have to commit time to other business-related activities, such as providing sales support or overseeing product development.
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