Actionable tips, community conversations, and marketing inspiration.

Cost per Mille (CPM): A Clue in Your Ad Spend Mystery

Patrick Holmes

Senior Digital Marketing Manager @ AdRoll

Topics Covered:

Cost per mille (CPM) refers to the average cost of one thousand ad impressions or the average amount you pay every thousand times internet browsers load your ad. The “mille” in cost per mille is the Latin word for “thousand,” so to find CPM, you divide cost by impressions and multiply by one “mille” or thousand.

The equation looks like this: CPM = cost/impressions x 1000.

Some display networks offer CPM as a pricing structure or bidding option. Most Facebook campaign types operate on a CPM pricing structure as well, even if you target different metrics for optimization.

While CPM is not a metric that one should spend a lot of effort optimizing, it provides an excellent signal for campaign diagnosis. Abnormal CPM levels can alert you to possible problems with your targeting or lead you to closely examine the quality of networks and placements your ads show up on.  

Why Should D2C Brands Pay Attention to CPM?

There are a variety of reasons why D2C brands should pay attention to CPM. Consider CPM as a health check — abnormalities in CPM might be an indication of a number of things that may lead you to conduct a more in-depth investigation and ask certain questions.

  • An extremely high CPM may indicate that your targeting is too tight, and the ad network algorithm is struggling to find enough inventory and appropriate auctions to spend your target budget. Check whether:
    • Your geographic targeting is too specific.
    • You unwittingly excluded too many demographics.
    • Topics you chose to target or exclude influenced your available audience more than you anticipated.
    • You chose a union of too many targeted interests rather than selecting them as intersecting options on Facebook, or you simultaneously targeted something like topic and keyword on Google Display Network (GDN).
    • You excluded networks or devices and forced your campaign to spend on a specific, expensive medium.
  • Different types of media can cause significant variability for CPM across various networks on Facebook. If you have a combination of video and static image ads in one ad set targeting several placements, remember to check report breakdowns frequently. This is to make sure the algorithm allocates your budget across platforms in a way that benefits your business rather than enabling Facebook to just spend your budget filling in inventory nobody else wants to buy.
  • CPM anomalies in display or video campaigns can indicate trouble with the website or content placements your ads run on. Google Display Network commonly suffers from websites that possess almost no content, but stuff pages with ad placements. These sites send bots or low-paid workers to click on ads and then fill out forms on the sites the ads lead to in order to provide fake feedback to the Google algorithm that the ad-stuffed site produces users likely to convert. Websites with a string of random letters and numbers often indicate this type of thing.
  • Similarly to GDN, you need to pay attention to placements on Youtube campaigns when advertising on mobile and tablets. Parents that fit into your targeting criteria often let their children watch Youtube on their devices. If your campaign seems to serve exclusively on animated videos for toddlers, remedy that through the video ratings options, through the parent demographics, or by excluding topics related to kids and family.
  • Do you know a reasonable CPM baseline for each of the major networks your regularly advertise on? Paying attention to historical CPM as it relates to quality of business can help you quickly spot anomalies in the future.

An Alternative to CPM

Viewable CPM (vCPM) is different from CPM in that it measures how frequently an ad is seen by users, as opposed to the number of times a browser loads it. This means that instead of tracking cost per thousand impressions, vCPM tracks cost for viewable thousand impressions. vCPM is preferable for D2C brands because they would not be charged if users do not see an ad. For example, advertisers would not be charged if a browser loads an ad that a user does not see due to an overlay that blocks the ad element.

According to the Internet Advertising Bureau (IAB), an ad is classified as “viewable” when a user sees more than half of the ad for more than one second. This also applies to video ads sold on a vCPM basis — users need to see more than half of the video for longer than two seconds. 

Ultimately, because no one really sees more than half of all ad impressions, advertisers pay almost 3X more for CPM advertising to reach the same amount of people.

Now that you know what CPM is and how it is useful, what about SEO? Do not miss out on these tips and tricks to get started on your SEO journey (and don’t forget to use the template provided). 

Explore Next

Topics Covered: