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Cost Per Thousand Impressions (CPM) is defined as the cost per thousand impressions of your ad on a web page. It shows you how effectively your ads are reaching your target audience and whether your marketing budgets are being used optimally.
An accurate CPM calculation can help you understand which ads perform well and which don't, and how you can improve your marketing results. Here, we'll look at what CPM is and help you determine if your CPM is above or below industry standards.
What is the cost per thousand impressions?
Since contextual advertising is actively used in almost all areas of business, it is very important to determine whether it reaches the target audience and whether it has the desired impact. This is where the cost-per-thousand/thousand (CPM) metric is important.
So, what is CPM?
In the marketing lexicon, "cost per thousand" or "cost per thousand impressions" refers to the budget an advertiser puts into a thousand views of their ad. This applies to the display of ads—contextual advertising, banners, native advertising, etc.
Note: Mille is the Latin word for "thousand". Therefore, CPM is also known as CPM for short.
CPM is a general display advertising costing methodology that is used by both the publisher and the advertiser. For example, a website hosting display ads may want to charge a certain amount per thousand impressions. Once this limit is reached, the advertiser or marketer pays a pre-set CPM.
Advertisers can calculate their own CPM according to their marketing budgets and offer it. Let's say you spent $2,000 on a campaign spread across 10 display ads across multiple sites. Each ad will generate a certain number of impressions, and based on your total marketing investment, you can calculate your CPM.
A high CPM (beyond what you expected) means your ads aren't performing as well as you'd like — you're spending more money to reach a limited audience.
A low CPM is not always preferable. If you find yourself spending too little per impression, it could mean that you're reaching too large an audience that isn't targeted. In this case, the level of engagement in advertising may decrease.
Unique Campaign Objectives
That's why it's so important to understand your unique campaign goals when deciding what a good CPM would be for you. For example, if your main goal is brand awareness, you want a low CPM.
On the other hand, if you want tangible actions like downloading an app or signing up for a service, your goal should be a relatively high CPM balanced with good impression quality.
So what are the components of CPM?
It can be split into two parts:
1.The cost of the target audience
Each ad will use target audience data to target potential customers or create a lookalike audience for deeper engagement. The cost of this data is a large part of the cost per thousand impressions, as this is what makes your ad so relevant to the audience.
2.The amount you pay for the quality of the advertising platform
For example, if you offered a certain amount for advertising in one place, The impressions generated from this investment will drive up your CPM. In today's world of automated ad exchanges, you can make quite a large investment in ad space, depending on the scale of your campaign.
Let's look at a scenario where you decide not to use audience data and just target a specific topic. If you are in the travel industry, you can advertise on websites that focus on topics such as "Paris" or "Recreation". Here, you only pay for ad space, and as a result, your CPM will be lower.
What is a good CPM and is a low level always desirable?
CPM can vary greatly depending on the type of display ad you choose. On average, advertisers spend $2.80 per thousand impressions, but that doesn't necessarily mean a positive click through rate (CTR). The average click through rate gradually decreased by 23%, which suggests that advertisers could better optimize their impressions.
Global CPMs are steadily rising, increasing at an average rate of 12% per year. However, engagement levels (clicks) remain low. As a marketer, pay close attention to ad placement and audience targeting to ensure your campaigns deliver measurable returns—regardless of CPM.
Recommendations to help you understand if your CPM is optimal:
As mentioned, classified ads are cheaper, but they are less inspiring for user action. If you're using audience data and targeting a contextual keyword (as opposed to just a topic), your CTR could triple.
For example, instead of "Paris", ads targeting "what to do in Paris in the summer" will find more interest.
Native advertising is a type of display advertising that is relevant to the subject of the site.
If your client, for example, reads an article about the top ten vacation itineraries, then advertising on vacation sites with the theme "how to save money on vacation" will be very effective.
Native ads have 2-3 times higher click-through rates than banner ads.
When calculating what a good CPM is, you must consider your unique campaign objectives.
- Videos are the most expensive in terms of cost per thousand impressions, ranging from $10 to $15. However, videos generate the most interest.
- If you are planning to launch a new product, the CPM may be minimal.
- But, if you want to advertise a highly competitive product or service, it's a different story. In this case, it is recommended to choose a cost per thousand impressions slightly higher than those of competitors to encourage clicks and conversions.
- And if you want to distribute certain marketing content, such as a seasonal ad or CSR video, you may be charged up to $20 per thousand impressions.
If you want to know more about marketing spend, there are three types of CPM you should keep in mind:
1. vCPM
vCPM, or apparent CPM, refers to how much an advertiser is willing to pay for actual views. Unlike regular CPM, this is not calculated after the campaign is deployed. Instead, it helps set the minimum bid amount for display ads.
For example, if an ad is on a publisher's website but the reader hasn't scrolled down far enough to see it, the advertiser doesn't pay for the impression. Google defines an ad as "viewable" when at least 50% of the content is shown for one or more seconds.
2. CPM that works
This is an effective cost per thousand impressions, which takes into account the opportunities to generate income from the impressions. Not only was the ad placed on the page (Standard CPM) or even viewed (vCPM).
The client must actually click on the ad and begin the revenue generation process in order to contribute to the effective CPM. You can calculate your effective CPM by dividing your total click-through revenue by your total number of impressions.
3. CPVC or cost per finished view
CPVC is specifically related to video ads. Here, you only have to pay if the viewer has seen the entire video, not if they left halfway through. Advertisers can choose a specific performance milestone, such as 5 or 10 seconds of video viewing.
The ad is considered viewed as soon as it crosses this threshold. First of all, CPVC applies the concept of VCPM to video ads, not display ads.
Now that you know what the different types of CPM are, let's take a look at the benefits of monitoring this metric.
Why do you need to control 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 CPM monitoring:
1.Building a brand
At the start of your marketing journey, CPM is a great indicator of your target audience's performance and lays the foundation for conversions.
2. Identification of the intended audience
If your ads on a particular website are getting a lot of clicks at a lower bid, it means they resonate very well with the target audience.
3. Investing strategically
Websites that show a good CPM are your prime candidates for future investments. This can help make your marketing strategy more targeted.
4. Overall effectiveness
If you can relate a high CPM to high click through rates, it means your marketing campaign is going well and you should double down on your efforts in the same direction.
CPM Optimization Tips: The Way for Marketers
There are several ways to improve your CPM. A higher CPM means your marketing campaign is reaching your target audience, making the impact you want, and paving the way for revenue. Here are three tips that can help you achieve this:
1. Use DSP
As a marketer, you can use DSP (Demand-Side Platform—an automated system) to ensure that your investments are directed to the most effective ad publishers. You can also set a maximum bid to keep your CPM below a certain threshold.
2. Ad formats in development
Remove ad formats that don't produce the expected CPM. For example, it may be that readers prefer to quickly close your interstitial ads (which show ads that appear before they go to the main site), while a simple banner gets clicks. The right ad format can significantly improve your CPM.
3. Advertisement Placement
Where you place ads on a website or mobile app has a lot to do with engagement. For example, a video that appears discreetly next to an article may not get the number of views it needs. Try different placements to see which one gives you the best CPM.
A good CPM is the starting point of a sustainable and successful marketing strategy. We recommend that you keep your impression costs within your budget and focus on how effectively an impression converts into a conversion for a truly ROI-focused campaign.
