CPM stands for Cost Per Mille, the Latin term for 1,000. In online advertising there are a number of different options when it comes to paying for advertising. CPM refers to Cost per thousand impressions, and is an efficient way to advertise, expose new customers to your brand, as well as raise awareness for various causes. The nature of CPM is exposure, though businesses can take advantage of the widespread exposure and (while using innovative and engaging marketing) can actually come through with a high CTR (click through rate).

CPM VS. CPC?

CPM is used when marketers are bidding for a slot. Say the CPM is $3.00. This means that the company would have to pay $3.00 for every 1,000 views on a website. Unlike other forms of online advertising, CPM pays out for views often measured by CTR (click through rate). Other forms of advertising are CPC (cost per click) and CPA (cost per acquisition, or action). CPC pays out when their a is clicked on, and CPA pays when a purchase is made after clicking on the ad (or other specific action). CPM is often used in lieu of CPC or CPA because, when using strong banners with a CTR, the advertiser can get a better return on investment. Here’s what that may look like:

You have a $200 budget for advertising. You can purchase CPC for $0.05 or CPM for $1.00.

With your $200 budget, you can purchase CPC at $0.05 an you’ll receive 4,000 clicks. ($200/.05=4,000)

With the same budget, purchasing CPM at $1.00, you’ll receive 200,000 impressions. (1000*$200/$1=200,000)

With CPC you’ve had 4,000 people engage your content, but with CPM you’ve had 200,000 impressions. It’s difficult to compare the value of the two, so then we’d look at the CTR of the CPM.

With a CTR of 1%, we would multiply the number of impressions by the CTR. 200,000*.01=2,000 clicks.

Now consider that you’ve gone back and reworked your banner to make them more appealing and to encourage the customer to click through. Now you’ve achieved a CTR of 3%.

Multiply the original impressions (200,000) by the CTR (3%) to determine the amount of engagement.

200,000*.03=6,000 customer engagements. This means that 2,000 more people have engaged your advertisement than with CPC, and you’ve the added benefit of 194,000 being exposed to your advertisement/brand.

Benefits of the CPM model

• CPM offers several benefits for business owners.
• With CPM you have a guaranteed number of impressions. You know exactly how much the advertising campaign will cost, and how many people will see it.
• Simple to calculate projected costs for new campaigns. (Cost/impression)*1000)
• CPM gives advertisers more control.
• Publishers love CPM. It provides them with a more reliable income, and more publishers are willing to work with you.