What is CPM in Digital Advertising?

With 4.95 billion internet users worldwide and over 2.14 billion digital buyers, it is no surprise that the digital advertising space is booming. For publishers and marketers in digital advertising it is imperative to understand the impact their ad campaigns are having and how to create a campaign that not only has a specific message to create brand awareness but also determine if they are getting the best bang for their ad spend buck.

CPM, also called cost per mille, is one of several pricing methods, and metrics, used in marketing to do just this. So let's take a deep dive into some questions surrounding CPM marketing—What is CPM? What is the CPM pricing model? And how can the CPM metric can be used to optimize display ad campaigns?

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Table of content:

• What is CPM?

• How to Calculate CPM?

• What Is a Good CPM?

• How to Optimize Your CPM Campaign

• CPM Advertising - Final Thoughts

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What is CPM? [Definition]

CPM, also known as cost per thousand impressions, is a formula that calculates the total ad spend for every thousand impressions on a web page. In CPM campaigns, an impression occurs every time an ad is successfully displayed to the target audience.

How to Calculate CPM?

To calculate CPM, you simply divide the ad spend by the number of impressions multiplied by thousand. The CPM formula is CPM = Ad spend / impressions * 1,000

An advertiser then pays a website owner a set cost per thousand impressions of their ads.

CPM has been one of several industry standard pricing methods for determining advertising costs and pricing web ads since online marketing campaigns began.

While campaign analysts and strategists now have a wealth of data and metrics available to measure total impressions, digital views, user engagement, and ad effectiveness, industry standard CPM still has many benefits for advertisers looking to track the ad impressions of their ad inventory.

For advertisers with a focus on brand visibility and brand awareness, a CPM digital marketing campaign is a common method of raising a brand’s profile. Furthermore, it is not just a case of how many times their advertising inventory is successfully displayed, but also approximately how many ad views they are getting on any given web page.

For example, a CPM strategy that works well for companies new to the market, is to run a CPM campaign across several websites on both desktop and mobile devices to create brand visibility and increase click through rate. As Microsoft put it, CPM campaigns are a good choice for marketing professionals “seeking brand awareness or reach when the goal is a large number of views or impressions of your ad.”

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What Is a Good CPM?

As with most digital marketing metrics and pricing models, you can’t define CPM for effective cost based only on a single value. Analyzing past campaigns, benchmarking results against averages for your market, and evaluating the impact of CPM on your ROI can help you determine whether your CPM impressions are a good pricing model for your advertising endeavors.

A lower CPM is not always a positive indicator for an advertiser, as it may be an indication of poor quality traffic. Similarly, for publishers, having a high CPM doesn’t necessarily translate into higher earnings, as some ad inventory may not be sold.

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‍How to Optimize Your CPM Campaign

Once publishers and advertising professionals understand the definition of CPM, they can start working to get the best CPM possible. Here are our top tips for your campaigns.

1. Choose an Ad Network

There are a range of ad networks available that can be employed to leverage cpm strategies, including Google AdSense, Criteo and SmartyAds, to name just a few.

For small companies new to display advertising it can be somewhat overwhelming to know where to start, or even if running ads on a CPM basis is the right choice.

While monitoring cost per thousand rates will help you assess the performance of your ad inventory for every thousand impressions and take actions to optimize your revenue streams, it’s essential to understand what influences CPM rates and the seasonality of these changes.

Each publisher will have to consider different factors to determine a reasonable CPM rate for their ads.

At Publift, we are experts at CPM advertising. We can advise you on the best ad format, placement and pricing methods for your campaigns and change them as and when needed. For more on the CPM definition and to learn more about other pricing methods for your ads, check out our guide to CPM, CPC, CPA, and CTR.

2. Prepare for Seasonal Variations

It’s important to know when to expect seasonal variations in CPM rates so you can better benchmark your performance and forecast future revenue. Look at your past data and see where you tend to see dips in your CPM. Think about your industry from a buyer’s perspective. If you run a dating website, then February will be a big month for you as advertisers will heavily increase spending around Valentine’s Day. If you run a personal finance website or health and fitness blog, then the January Blues may be your pot of gold as consumers rush to your websites to kick start their health and wealth New Year’s resolutions.

Knowing when to expect these fluctuations while working with the CPM model will prevent you from getting caught off guard when a drop comes rolling along and help you plan cash flow around these times. We would suggest not making any dramatic changes during a slump and use the time to work on upcoming content to take advantage when advertisers are buying big. If you need to do any testing on your site, the first month of the quarter is a good time.

The last month of the quarter, Black Friday, and Christmas periods, are not a good time for a site redesign to go live or to run another testing that may affect the site. Our account managers at Publift are experts in anticipating trends and building these into your ad management, so you don’t have to worry about it.

3. Place Your Inventory on a Supply Side Platform

In order to try to generate higher Google CPMs, you can place inventory on a supply-side platform (SSP) to open your ad inventory to more advertisers. If you have a niche audience or a high-quality website, more competition for your ads will increase the CPMs.

Another action you can take is to test and experiment with ad formats and ad placements to increase ad viewability.

Another path to improve revenue is to focus on fill rate. Even with a lower cost per thousand, you can increase overall earnings by improving the fill rate of your ad placements.

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CPM Advertising - Final Thoughts

As with all strategies in marketing, CPM strategies require constant testing and analysis to determine what works. At Publift we take the heavy lifting out of CPM marketing, driving high traffic and maximizing impressions.

Publift helps digital publishers get the most out of the ads on their websites. Publift has helped its clients realize an average 55% uplift in ad revenue since 2015, through the use of cutting-edge programmatic advertising technology paired with impartial and ethical guidance.

CPM FAQ

1. What is Pay Per Impression?

Pay per impression is the amount advertisers pay a website host for displaying their ads. This is calculated using cost per 1,000 (CPM) impressions.

2. What is an Ad Impression?

An ad impression occurs whenever an ad is displayed to an advertiser’s target audience.

3. What is a Good CPM for Display Ads?

A CPM is not something that can be measured as good or bad. Higher CPMs could have negative outcomes such as not all of a website’s ad inventory being sold. Lower CPMs could be a result of poor quality traffic.

4. How to Choose the Right Online Advertising Pricing Model?

Choosing the right online advertising pricing model depends on the type of business. For publishers, CPMs are lower risk because they only rely on the ad being displayed, but are a higher risk for advertisers. The opposite is true for CPAs, which only pay publishers when a user directly makes a purchase through an ad.

5. How does Traffic Seasonality Influence CPM?

Traffic seasonality can affect how many people visit a site and how many impressions ads receive. A common example is a dating site. When Valentine’s Day nears then the number of users that visit the site increases, raising CPMs.

6. Why is It Important That You Set Goals When Planning Your Display Ad Campaigns?

Setting goals is important because it allows advertisers to develop audience segments, set budgets, and the ad creatives that will be used. Because the differences in payouts—such as CPMs and CTAs— can affect the ad's efficiency, it is imperative for advertisers to choose the one best suited for their campaign.

7. How to forecast Impressions?

Software such as Google’s Ad Manager can forecast traffic and impressions to a site. When forecasting impressions, it is ideal to factor in traffic seasonality.