What is CPM?
CPM-This is the “cost-per-thousand” views of an advertisement. Often, advertisers agree to pay a certain amount for every 1,000 customers who see their ad, regardless of conversion rates or click-thru’s. The “M” in “CPM” is derived from the Latin word for 1,000 (mille).
Cost per thousand also called cost per mille, is a marketing term used to signify the price of 1,000 advertisement impressions on one webpage. If a website publisher charges $2.00 CPM, that means an advertiser must pay $2.00 for every 1,000 impressions of its ad. The “M” in CPM represents the word “mille,” which is Latin for “thousands.”
CPM is the most frequent method for pricing web ads. Advertisers commonly measure the success of a CPM campaign by its click-through rate, which is the percentage of people who saw your ad and clicked on it. For example, an advertisement that receives three clicks for every 100 impressions has a 3% CTR. You cannot measure an advertisement’s success by CTR alone because an ad that a reader views but does not click may still have an impact.
CPM vs. CPC and CPA
CPM represents one of several methods used to price website ads. Other pricing models include cost per click, where the advertiser pays each time a website visitor clicks on the ad, and cost per acquisition, where the advertiser only pays each time a website visitor makes a purchase after clicking an ad.
Different pricing methods are more appropriate for some ad campaigns than others. Cost per thousand makes the most sense for a campaign focused on heightening brand awareness or delivering a specific message. In this case, the CTR matters less, since the exposure from having an ad prominently placed on a high-traffic website helps promote a company’s brand name or message, even if visitors do not click on the ad.
Companies focused less on mass appeal and more on promoting a product to a niche audience gravitate toward CPC or CPA advertising since they only have to pay when visitors click through to their site or purchase the advertised product.
Website publishers like CPM advertising because they get paid for just displaying ads. However, because CPM rates are low—the $2.00 rate mentioned above is fairly standard—a website needs robust traffic to make decent money from CPM ads.
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