CPM stands for Cost Per Mille, with “Mille” being the Latin word for thousand. Therefore, CPM refers to the cost of reaching one thousand impressions or views of an advertisement. It is a common pricing model used by advertisers and publishers to determine the cost of running ad campaigns on various platforms, such as websites, social media, or mobile apps.
To calculate CPM, you divide the total cost of an ad campaign by the number of impressions (in thousands) it generated. The resulting figure represents the cost incurred for displaying the ad to one thousand people. For example, if an ad campaign costs $500 and generates 100,000 impressions, the CPM would be $5.
Cost Per Mille is often used as a benchmark to compare the efficiency and cost-effectiveness of different advertising campaigns or platforms. It helps advertisers evaluate the potential reach of their ads and estimate the expenses involved in achieving their desired audience size. By understanding the CPM rates on different platforms, advertisers can make informed decisions about allocating their advertising budgets.
It is important to note that CPM is not the only metric used in digital advertising. Other metrics such as click-through rate (CTR), cost per click (CPC), and return on ad spend (ROAS) provide additional insights into the performance and effectiveness of an ad campaign. However, CPM serves as a fundamental metric in the media buying process, especially for brand awareness campaigns where the primary goal is to maximize exposure and reach a wide audience.
While CPM can be a useful metric, it’s not without its limitations. For instance, it does not directly measure the impact or effectiveness of an ad campaign in terms of conversions or sales. An ad with a high CPM may reach a large audience but fail to generate desired actions from viewers. Therefore, it is crucial to consider other performance indicators and align them with your campaign objectives when evaluating the success of your advertising efforts.