CPM: A practical guide for marketers

(Image credit: Pixabay)

Did you know that 55% of all advertisements are digital? No matter what type of business you run, digital advertising will likely account for more than half of the leads you generate and more than half of the visibility. Maybe even more than half the success you have. Given the importance of digital advertising, it makes sense for you to understand what is known as the foundation of digital advertising: CPMs.

With CPMs, you can improve your digital advertising strategy, which translates into business growth, better customer retention, and satisfying returns on your marketing investments.

What is the definition of the term “CPM?”

CPM stands for “cost per thousand” and is also known as “cost per thousand”. Mille is Latin for thousands, and “M” is the Roman numeral for thousands – hence the “M” in CPM.

CPM is a marketing term used to describe the cost of one thousand ad impressions made on a web page. An impression is counted each time an ad is displayed.

It is one of many methods used to price online advertisements. Others include CPC (cost per click) and CPA (cost per acquisition). However, what makes CPM the foundation is that it simply measures impressions, not clicks or shares, which are harder to generate.

Any viewer engagement received by an ad will count towards the final CPM tally.

How does CPM work in digital marketing?

CPM is the counting of digital ad impressions. An ad impression is a marketing metric that counts the number of views a piece of content receives from users across websites and social media.

Also known as “ad views”, impressions are responsible for counting the views (not clicks) an ad may receive. CPM therefore measures how much a website charges the advertiser for every 1,000 impressions that appear on the site.

For example, when a website posts an ad and charges $1 per CPM, that means the advertiser has to pay $1 for every 1,000 impressions of the ad.

How can you calculate the cost of your ad?

Calculating CPM is simple. Multiply the total number of onsite impressions by the CPM rate. Then divide that number by 1000.

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Here is an example showing how to measure the cost of your CPM campaign:

Start with your CPM rate: Let’s say you are an automotive company and your CPM rate is $1.43 (this is the automotive industry average). CPM rates are generally between $1 and $2, although some industries (like law) can be higher than $5.

Multiply your CPM rate by the number of impressions: As your car ad campaign rolls out, your ad will collect impressions every time it is shown to users on the publishing site. Say your ad campaign ended with 6,000 impressions. To calculate CPM, multiply the number of impressions by your CPM rate:

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Divide by 1000: Once you have this value, divide it by 1000:

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CPM Calculator
Image credit: Pixabay

Are there formulas or calculators for CPM?

If you don’t want to calculate CPM yourself, there are calculators you can use to get the cost of your ad campaign.

Websites like Online Advertising Guide have a calculator, for example, when you need to know your CPM quickly and accurately. You can also use filters such as country and channel for even more precision.

How relevant are CPMs today?

Digital marketing is constantly evolving. You may be wondering if CPMs will remain an important metric for digital advertising.

Whether you run a website, multiple social media channels, a YouTube channel, or all of the above, CPM remains an important metric for analyzing what content is most valuable to advertisers.

CPM campaigns also remain useful in many ways, improving credibility, delivering relevant leads, and generating industry buzz.

Consider not just where to find an audience, but who your audience is. This is closely related to how CPMs deliver relevant leads – marketers need to target the right people through fine-grained marketing and segmentation so that no cost from a CPM campaign is wasted. When all the viewers are the right viewers, you introduce your business to the people who really care about the message.

Making sure your ads are compelling is how CPMs are relevant today. Any old banner ads asking you to “CLICK HERE!” just won’t work. What you put into your CPM campaign is what you get out of it.

You can create inviting ads with concise, smart, and eye-catching messages without being clickbait. Visuals should also be compelling, memorable and complement the message.

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