What Does CPM Stand For?
CPM stands for cost per mille, or cost per thousand impressions (“mille” is Latin for “thousands”). 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. To find CPM, you divide the cost by impressions and multiply by one “mille” or thousand. The equation looks like:
CPM = (cost ÷ impressions) × 1000
CPM is typically used in campaigns that are designed to be seen by thousands of people. Here’s a look at how this actually works, which kind of campaigns it works best in, and where the results come from. We will also touch on how CPM relates to digital marketing and how it fits into a wider company marketing strategy.
How Does CPM Work?
CPM is a very traditional online marketing metric in which companies pay for views of their advertisement. It's primarily used in advertising media selection, marketing as related to web traffic, and online advertising. One great example that many companies might be familiar with is Google Ads. This platform works on a CPM and a CPC basis.
Some display networks offer CPM as a pricing structure or bidding option. Most Facebook campaigns operate on a CPM pricing structure as well, even if you target different metrics for optimization.
Because one impression carries such a small weight, these numbers are typically measured in thousands or more. Unlike a cost-per-click model ( CPC ), a cost-per-thousand impressions model measures a very high-level awareness of a company.
How do CPM campaigns compare?
How do campaigns that use the CPM model compare to other types of campaigns, like CPC? CPM campaigns generally cost less than other compatible marketing strategies. Companies can get more impressions for less money than they can get guaranteed results from most other marketing campaigns. However, an impression can be difficult to measure. An "impression" is counted any time the platform serving the ad determines that the ad is viewable by their standards.
When Do Companies See the Best Results From CPM Strategies?
Companies see the best results from CPM strategies when they're used in a brand awareness ad campaign that is focused on raising recognition of their product and/or brand.
Because CPM strategies are so targeted, they're not ideal for smaller, niche companies to appeal directly to a small subset of the population. They also don't do well if you need quantifiable results to back up your marketing dollar spend. While CPM isn’t a metric to spend time optimizing, it is an excellent signal for campaign diagnosis. Abnormal CPM levels can alert you to possible problems with your targeting or lead to closely examining the quality of networks and placements your ads show up on.
To create a strong foundation for a CPM strategy, make sure you clearly understand your:
Overall business goals and how a CPM model will help you measure them
Particular goals for your new strategy
Definition of a lead
Appropriate ways to follow up on your newly generated customer awareness
Remember, don't use CPM as a strategy by itself. The best results from CPM strategies are always in tandem with another form of marketing that follows up on your leads and works on converting them into customers (with retargeting ads and email marketing, for example).
How to use CPM as an ad health check?
Abnormalities in CPM might indicate a number of things that lead you to conduct a more in-depth investigation and ask certain questions. Here are five examples to familiarize yourself with.
An extremely high CPM may indicate 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 CPM variability 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 struggles with 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 their linked websites. This provides the Google algorithm with feedback that the fraudulent site produces users who are likely to convert. Websites with a string of random letters and numbers in the URL often indicate this type of tactic.
As with GDN, you need to pay attention to YouTube campaign placements when advertising on mobile and tablets. Parents who fit into your targeting criteria often let their children watch YouTube videos on their devices. If your campaign seems to serve exclusively on animated videos for toddlers, remedy the problem 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 you regularly advertise on? Paying attention to historical CPM as it relates to quality of business can help you quickly spot anomalies in the future.
How Does CPM Relate to Digital Marketing?
Digital marketing encompasses many different elements, including low-level awareness of a company, product, or brand. This is where CPM strategies can boost digital marketing efforts to the next level. If no one knows about a company and they don’t have a built-in niche market, where will customers come from?
CPM strategies are a great way to raise awareness and brand recognition. This awareness primes people who are looking for the type of solution being offered.
For example, a company that has created a new type of ballpoint pen might run a CPM campaign across multiple websites to raise awareness. Since many people use ballpoint pens, all the company wants to do with this campaign is raise awareness of a different pen on the market. After enough people know about the pen, the company can run more targeted ads that are designed to appeal to subsets of their customer base.
Another way of thinking about it is to look at CPM strategies as a top-of-the-funnel strategy. These strategies focus on capturing a wide amount of eyes on a piece of marketing and depend on other strategies to carry on the funnel.
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 aren’t charged if users do not see their 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.
Getting Started With CPM Marketing
To start a successful CPM marketing campaign, a foundation must be built on three things:
A proper understanding of the CPM meaning, and what a lead, awareness, and the CPM metric mean to your company and strategy
An established budget for this part of your marketing that is separate from your overall budget
A plan for the next steps in your overarching marketing strategy
If these three pillars are not in place before a CPM strategy is deployed, it will be difficult to see success from your campaigns.