If you’re new to the digital marketing scene, it may seem like there are endless acronyms to learn – PPC, CRO, CTR, and many more. One term you should learn and incorporate into your digital marketing strategy is CPM.
CPM means the cost per 1000 impressions. This is a useful metric to better comprehend the effectiveness of your advertising campaigns, and adds context to your ROAS and overall ROI for marketing efforts.
Learn more about CPM and how you can use it to improve your business’ marketing.
What Does CPM Stand For?
CPM actually stands for cost per mille, as mille is Latin for thousand. In this way, CPM means cost per thousand, referring of course to a thousand impressions.
Now that you know where the “M” in CPM comes from, what does CPM actually mean? As stated, CPM measures the cost per one thousand impressions. Impressions are the number of times an ad is displayed and viewed by someone online. CPM, then, measures how much it costs to display your ad 1000 times, hopefully to a targeted audience and potential future customers.
CPM is a good metric when you want to assess how an ad campaign improved brand awareness, as it only looks at how many times the ad was seen, not how often it was clicked or how it led to conversions.
Cost Per Thousand Impressions
Different advertising models use different metrics. PPC campaigns, for example, would be more concerned with CPC, cost per click, since advertisers pay per click in that method. CPM is better used in ad campaigns that hope to spread brand awareness. While your ad can still be optimized for clicks and hopefully conversions on your website, CPM only looks at the cost to show the ad.
You can often better understand how effective an ad is by considering other metrics like click through rate, which tells you how many of those who saw the ad clicked on it. Click through rate does not definitively tell how worthwhile the CPM was, since those who did not click may still remember your brand and become customers in the future.
When advertising and paying based on number of impressions, advertisers bid how much they are willing to pay as a CPM. Generally, an ad is run over a certain number of days, with a budget for the total length of the campaign.
Let’s say you want your ad to reach 5000 people per day, and your advertising budget is set at $20 per day. Your CPM would be $4 (see math below).
5000 people per day / 1000 impressions = 5
$20 per day / 5 = $4 per 1000 impressions.
Many people ask what a good CPM is, but there isn’t one correct answer. Your cost per 1000 impressions should be valued based on how valuable you believe those impressions are to your business. If you think showing the ad is worth it, you may be willing to pay a higher CPM.
When To Use CPM
CPM is a great way to pay for ads, depending on your goals. If you’re trying to improve conversions or sell a certain product, other marketing strategies are probably more effective, like pay per click, which would be measured using CPC instead.
CPM is a good metric to use when your goal is more about visibility than conversions or clicks. Of course, ideally people will see your ad and click through to convert, but basing your advertising cost on impressions is more about brand awareness. Use CPM if you’re trying to get your brand name out there, or to market a new deal or other new piece of information.
CPM is also helpful when advertising for a very targeted demographic. If you are placing the ad on a highly relevant website that is related to your brand, CPM will be helpful because those impressions may be worth more than random ad impressions on a broader site like Google.
CPM can also work in your favor when you are trying to convert, but make sure your ad is conversion rate optimized and that it is likely to drive clicks, conversions, or sales.