September 22, 2020
3 min read
CPM (cost per thousand impressions) is an online advertising term that refers to how much a thousand (mille in Latin) ad impressions are costing.
If the cost per thousand impressions is charged at $2, the advertiser has to pay $2 for every one thousand impressions their ad gets. If the ad is seen only 10 000 times, the ad will cost a total of $20 ($2 x (10 000 / 1000).
A CPM campaign is heavily influenced by the traffic the advertising platform gets. Very popular news websites, for example, can get millions of impressions every month, meaning that a banner ad in a prominent position could end up costing a lot.
On top of a CPM pricing model, online advertising campaigns can also be priced on a CPA (cost per action) and a CPC (cost per click) basis.
With a CPA pricing model, the publisher only pays for every desired action (a booking, an order, a newsletter subscription) taken. It’s important to negotiate the terms for what is considered the desired action with this pricing strategy.
A CPC model, on the other hand, is priced based on the number of clicks an ad gets. Factors such as related keywords and market competition can determine the final CPC on platforms like Google AdWords.
Most online marketing campaigns use metrics such as click-through rates (CTRs) to measure the success of a particular ad or campaign. Since both CPA and CPC pricing models are based on either a click or an action, the CTRs are easy to measure.
Compared to CPA and CPC, CPM campaigns are beneficial when the business is looking to build brand awareness or deliver a particular message to a wider audience. It’s more suitable for campaigns with a mass reach that don’t rely on a particular CTR.
CPA and CPC campaigns, on the other hand, are useful when the product is aimed at a smaller and more particular niche. If your marketing goal is to generate sales, not to build awareness and run a more long-tailed campaign, a CPC or a CPA campaign is more suited for you.
The CPM you should be aiming for depends on different factors, such as your industry, the advertising platform, and your overall competition.
On social media sites like Facebook and Instagram, you should expect a CPM of between $5 – $7. Facebook and its subsidiaries tend to be more expensive than other social media platforms: you can run CPM campaigns on Twitter and YouTube, for example, for around $2 and $3.
Many bigger websites run by multimedia publishing houses usually set their own CPM and depending on the ad placement and the size of the ad, the CPM could start from a mere $100 and go up to tens of thousands.
Similarly, on programmatic marketing platforms, you should look for an average CPM between $2 and $4.
Generally, you should start with a small budget and consider what your campaign should achieve. You could gain huge exposure for your business running ads on the front page of a mainstream newspaper, which could translate into increased sales at a later date.