Digital marketing is a game-changer for brand awareness. But how do you evaluate the impact of your ad campaigns? And how much do you invest in improving your brand visibility? Enhance your digital marketing strategy with CPM, the most common method and pricing model in online advertising. Keep reading to find out how!
Key Takeaways
- CPM is a metric measuring the total ad spend for every thousand impressions and is short for cost-per-thousand-impressions or cost-per-mille.
- To calculate CPM, you divide the total ad spend or total cost of the advertising campaign by the number of impressions and then multiply the result by 1,000 to get the CPM rate. In short, CPM = Advertising cost / 1,000 Impressions.
- The main advantage of a CPM marketing campaign is increasing visibility or spreading a specific message across a large audience.
- A successful CPM strategy is to run campaigns on several high-traffic websites via mobile and desktop devices in order to draw in an audience that believes your product or service can solve their problem.
What is CPM?
Short for cost-per-thousand-impressions or cost-per-mille, CPM is a metric measuring the total ad spend for every thousand impressions. In other words, this formula demonstrates how much marketers and advertisers pay to have their ads displayed to 1,000 people on a webpage. Since they’re small units of measurement, they’re measured by 1,000.
Note that we’re talking about an impression, not a click-through rate. So, this is only a potential audience, meaning they may or may not take action after seeing the ads.
How Do I Calculate CPM?
How does CPM work? Publishers charge advertisers a fee for ad space. They use a CPM metric for pricing web ads, which we’ll discuss shortly.
Another concept we have is the CPM bid, which is how much advertisers are willing to pay for 1,000 ad impressions on an advertising platform. When an advertiser launches their CPM campaign, the ads are successfully displayed, and the brand gains more recognition.
In that sense, CPM is an impressive top-of-funnel strategy. Take Google AdSense, for example; Google uses a CPC (Cost-per-click) and a CPM model.
Still, what is the CPM formula or pricing model? Simply put, you divide the total ad spend or total cost of the advertising campaign by the number of impressions. Then, multiply the result by 1,000 to get the CPM rate. In short, CPM = Advertising cost / 1,000 Impressions.
Why is CPM Important in Digital Marketing?
Here’s how a CPM strategy in marketing can benefit an advertiser.
Increasing Brand Awareness
The main advantage of a CPM marketing campaign is increasing visibility or spreading a specific message. After all, ad views grant you the large-scale exposure you need and promote your brand or message.
A successful CPM strategy is to run campaigns on several high-traffic websites via mobile and desktop devices. This way, you can draw in an audience that believes your product or service can solve their problem.
Sticking To Your Budget
It’s relatively easy to stick to your budget when you launch CPM campaigns for two reasons. Firstly, the prices of these digital ads are pre-determined. To compare, other pricing methods can be challenging to predict.
For instance, if an advertiser pays a webpage owner using the CPC method, they’ll be charged only when a viewer clicks on their advertisement. Other marketing strategies and metrics include cost-per-acquisition (CPA), which is when marketers pay publishers for each purchase per ad.
Secondly, what helps you stick to your budget is that CPM ads usually cost less than other pricing methods like CPC or CPA. Average CPM rates vary between $1 and $10 for every thousand impressions.
What is a Good CPM in Digital Marketing?
The best CPM marketing campaigns aren’t necessarily the cheapest. After all, that website may display advertising to the general public on a web page rather than targeting your specific audience. Also, it may have poor traffic.
Instead, a good CPM serves your marketing goals and adds value to your business. Since values and goals differ across advertisers and fields, there’s no one-size-fits-all answer to this question. But we’ll help you figure out what works for you.
For one, you need to look at your present and past campaigns. Analyze that data, and you’ll know what changes you need to make to get the best cost per platform. Then, of course, you need to compare the CPM of any website owner to the average rate in your market because rates may vary across fields.
Finally, you should consider your revenue and return on investment (ROI). In other words, is the impact of this campaign worth the initial investment, deeming it a success? How has it impacted your ROI and revenue?
Since the impressions number isn’t indicative of the lead number, you need to see how many of your target audience converted into customers to evaluate your performance.
What Are the Factors Affecting CPM Rates?
Numerous factors play into advertisement prices, the main ones being the following:
Website
Websites impact the pricing in at least three ways. Firstly, the owners of a generic news website may charge less per digital view on their web page than on niche websites. After all, the latter have their segmented audience that’s more likely to care about your product or brand and become customers than news readers.
Secondly, low prices may indicate a poor-traffic website and vice versa. In 2021, the average ad cost per thousand impressions was about $6.50 on Twitter and LinkedIn and $9 on Facebook and Instagram. This is on the higher end of CPM ad prices because of how big these social platforms are.
Thirdly, website quality can affect your brand image, and high-quality website owners might charge more for that reason. So, you might want to invest in ad placements if brand safety is your priority.
Location
Advertisers may be charged higher fees when they specify particular countries or regions as their target audience. Also, how advanced the digital advertising industry is in that location affects the cost. Finally, website owners may consider the country’s spending power.
Devices
Whether you want your CPM ads displayed on mobile devices or desktops makes a difference. Mobile phone formats get more traffic, thanks to the in-app ads. However, desktop ads generate better conversion rates.
Timing
Regarding timing, ad rates go up during gift-buying seasons (like December and other holidays) and Black Friday. Also, they might increase for stationaries during September or sports equipment during warm seasons.
CPM Campaign Launch: Let’s Go!
Ultimately, CPM strategies are practical tools for increasing brand visibility. Companies pay to have their ads displayed on a website and get charged for the total impressions. As for how CPM works, it’s simply the ad cost per 1,000 impressions or digital views.
Karl Barlett is a veteran in the marketing industry with over 9 years of experience in media buying. Karl has been instrumental in developing successful media campaigns for some of the biggest brands in the DTC world with an obsession to get the most out of every marketing dollar spent. Outside work, he enjoys video games and spending time with his dog, Louie.