CPM stands for “cost-per-mille” or “cost per thousand”. It’s a marketing term that refers to how much it costs an advertiser to have their ad appear 1,000 times on a website. The M in CPM comes from the Latin word mille which means one thousand.
Why Use CPM?
Advertisers - What is CPM used for?
The purpose of the CPM metric is to enable an advertiser to easily compare the costs of different advertising campaigns. Say you’re running an ad campaign in 3 countries through digital marketing and outdoor billboards. The cost per thousand impressions (CPM) metric enables you to compare the cost of these media channels.
Publishers - What is CPM used for?
CPMs enable publishers to quickly determine how much advertisers are paying for impressions on a website. CPMs can differ across ad units, advertising demand partners, GEOeos, formats, devices, and many other criteria. As a result, the CPM metric allows publishers to see how effective their ad impressions are across these categories.
What Is Cost Per Click (CPC)?
Cost Per Click (CPC) means advertisers pay per click instead of per impression. CPC or average CPC is calculated by dividing the total cost of your clicks by the total number of clicks. The majority of online advertising is sold on a CPM basis. However, Google’s AdWords platform is one exception where the majority of media is bought via CPC.
What Is Cost Per Acquisition (CPA)?
Cost Per Acquisition (CPA) means that advertisers pay per each acquisition that originated from an ad. CPA is calculated by dividing the total cost of acquisitions by the total number of acquisitions.
What Is Revenue Per Mille (RPM)?
Revenue Per Mille (RPM) is used by publishers to measure the effectiveness of all ads on a page. It is calculated by dividing all advertising revenue from a page by page impressions times 1,000.
How Do You Calculate CPM?
CPM is calculated by dividing ad campaign costs by the number of impressions times 1,000.
As a result, CPM is the cost of a media campaign, relative to its success in generating impressions to see. As the impression counts are generally sizable, marketers use CPM to simplify the data.
For example, if a website sells 5,000 advertising impressions for $7.34, the CPM is calculated as:
7.34/5,000 * 1,000 = $1.47
You can use a CPM calculator to quickly work out CPMs. The CPM calculator requires two of the following variables: ad impressions, total cost, CPM.
What is a Good CPM?
A good CPM will vary according to the website’s niche and their audience. CPMs will also vary depending on ad format, ad size, and viewability. Furthermore CPMs for native video formats will be much more lucrative than a standard display format.
For example, a high-value niche like financial news will receive higher CPMs than a low-value niche like gardening. In addition, advertisers will pay more to target users in tier 1 Geos like the USA and UK. They will pay less to target users from low-tier countries like Russia and India. A good CPM can also depend on which ad network you are using. For example, AdSense generally pays more than an ad network like Propeller ads. For more AdSense alternatives see our guide here.
A high CPM is not always a good thing.
CPMs and Ad Refresh
When publishers use ad refresh technologies they can gather more impressions per session. This leads to a decline in CPMs but an overall increase in ad revenue. For example:
CPM without ad refresh:
Revenue = 1000 (ad impressions) * $1.79 (CPM) / 1000 = $1.79
CPM with an ad refresh:
Revenue = 3000 (ad impressions) *$0.87 (CPM) / 1000 = $2.610
An advertiser will lower their CPM bid when an ad unit is refreshed because the ad will have less time on screen.
A CPM rate can be inflated by introducing a high floor price. For example:
Publisher A uses no floor price and sells one thousand impressions for an average CPM of $1.13. Publisher A’s final revenue is $1.13.
Publisher B uses a floor price of $0.90. As a result, this publisher only sells 700 impressions (since 300 impressions did not exceed his floor price) but his CPM is higher at $1.17. Publisher B’s final revenue is 700*$1.17 = $0.82.
As this example shows, publisher A can generate more ad revenue overall even with a lower CPM. CPMs can be misleading without taking into account other factors like floor prices and an ad refresh. Therefore, it is important to look at advertising performance holistically instead of this one metric alone.
How Much Do CPM Ads Pay?
CPM ads usually pay publishers between $0.2 – $5.0 per thousand impressions. However, this will depend on many factors including the website’s niche, traffic patterns, seasonality, and users. It will also depend on the ad network connected to your site. With header bidding, you don’t have to rely on one ad network only, you can connect to multiple ad networks, SSPs, and ad exchanges. eMarketer has found that mobile CPMs have dropped globally from $3.81 to $3.16. While it is not clear what is behind this trend, one of the reasons could be a rise in the number of impressions publishers are making available through adding new ad units like sticky footers and using smart ad refreshes. As with many markets, CPM ads rely on supply (publishers looking to sell impressions) and demand (advertisers looking to buy impressions) for pricing.
For advertisers, CPM advertising is a good approach for a brand awareness ad campaign where the goal is to reach large numbers of prospects. CPM advertising enables advertisers to quickly gauge how effective their ads are across large numbers of impressions.
YouTube and Facebook CPMs
A digital marketing campaign will often target Facebook and YouTube as these platforms receive huge volumes of traffic.
If you’re a YouTube creator, you can expect to see an average of $2 CPMs. However, this is also dependent on the target audience. YouTube CPM can vary significantly across different Geos. For example, one source reported the United States had an average CPM of $0.38, while Switzerland came in at $3.87.
The average CPM campaign for Facebook ads across all industries is $11.19. A Facebook ad attracts higher CPMs because the platform has a high conversion rate. This makes it ideal for an advertiser targeting bottom-of-the-funnel conversion. Conversely, display ads on blogs, news sites, and other websites have lower CPMs and are better suited for brand awareness.
How To Increase CPMs?
The fastest way to increase CPMs or overall ad revenue is to use an adtech company like Snigel. By analyzing your website’s ad setup, current CPM rate, and traffic patterns, Snigel can build a custom setup for your needs. Our Ad Ops experts and header bidding solution can deliver significantly higher CPMs and ad revenue within two weeks. Contact us here to find out more.
About the Author
Ben is Snigel's Head of Publisher Success. He works on business development and marketing - spreading the word about how Snigel can help publishers supercharge their ad revenue.
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