CPM advertising, or cost per mille, is a form of advertising that charges an advertiser a certain price per thousand impressions of their ad. It has quickly become the most common method for charging for mobile ads. Mobile publishers love this form of advertising because of its focus on impressions instead of clicks. This benefits the publishers in a big way. But how can you use CPM advertising to benefit your business and how do you know which platforms use CPM marketing? This article will answer these questions and more.
What is CPM Advertising?
First, let’s discuss what CPM advertising is in more depth. As mentioned, it is a model that charges for every 1,000 impressions an ad receives. Essentially, if a publisher charges $1 CPM, the advertiser will pay the publisher one dollar for every 1,000 impressions the ad has. Although the official title of CPM is cost per mille, it can also be referred to as cost per thousand.
This is the most common way to price ads in the digital marketing world. It is widely understood and because of this, it is easy to compare the prices of different publishers. To understand what CPM is, you must understand what an impression is. An impression is essentially an ad view. How many times did people see your ad on their device? This way to determine how much an advertiser owes a publisher is fair and universal. CPM marketing is incredibly beneficial for publishers and advertisers.
How to Calculate CPM in Marketing
The formula is simple: CPM= Total campaign cost/ (total number of impressions/1,000)
Total Campaign Cost
The total campaign cost is how much an advertiser pays the publisher in total. A formula for this is: Total Campaign Cost= CPM x (Total number of impressions/ 1,000)
The total impressions are how many times people clicked on your ad. The formula for this is: Total Impressions= (Total Cost of Campaign/ CPM) x 1,000
Example of Calculating CPM
Let’s say an advertiser pays a publisher $25,000 to publish their ad. The total campaign cost would be $25,000. This ad generated 5 million impressions. How much is the cost per thousand of this advertisement?
Cost Per Thousand= $25,000 (Total Campaign Cost)/ (5,000,000 (Total number of impressions)/ 1,000)
The Cost Per Thousand, or CPM, is $5 per one thousand impressions. In other words, for each impression, the advertiser pays the publisher half a cent ($0.005).
What is a Good CPM in Marketing?
This question is nearly impossible to answer, but we need to do our best to understand what a good CPM is. Although you would expect a lower CPM to be the most beneficial to your advertising company, this is not necessarily the case. Sure, a low CPM can be great because you get lots of impressions for little cost, but will these impressions be beneficial to your business? The impressions themselves only matter if there is engagement after the audience views your advertisement. If you are trying to reach a campaign goal, will lots of impressions with little engagement propel you to meet these goals? When aiming to reach campaign goals, it is important to recognize quality can be more important than quantity. If you have fewer views, but a greater portion of those views lead to further engagement, this can be lucrative for your business.
Why is CPM Advertising Important?
CPM is vital to most online publishers because it can predict the amount of revenue a publisher can make off of ads. Additionally, CPM advertising can help tell you what audience is most responsive to your ad. For example, an advertiser may buy CPM advertising from two separate publishers. One publisher may have a younger demographic and the other publisher may have an older demographic. Based on the number of impressions you receive on both ads and the engagement, you can determine what age group responds best to your ad. This can help you better target your audience with your future advertising campaigns. CPMs are important because they are a relatively inexpensive way to learn about your buyers and their interest.
What Platforms are Using CPM Advertising?
Most online publishers use CPM advertising as a way to make money. One of the most common examples is Google Ads. Google, the most popular internet search engine, is an ideal place for CPM advertising, as it has such a large audience. Advertisers can gain foot traffic to their websites from this. Additionally, Google knows a great deal about their users and can determine what ads fit best with what audience of people.
How Google Decides What Ads to Show You
Firstly, Google knows about its users because, when you sign up for Google, you tell them about yourself. Google asks your age, gender, etc. You tell them basic guidelines about yourself. Next, Google gauges your interests based on your search history. For example, if you are searching for particular music videos, Google knows what artists you are interested in and may give you an ad for a concert of a similar artist. Google absorbs every single thing you search and do on its platform and uses that information to determine what ads you will be likely to click on. Google also knows things you do not directly tell them. It can predict your general budget for certain items. They gather intel on previous purchases and know your general price range based on what you search.
Google Ads and CPM
Although Google Ads may have a higher CPM than other publishing platforms, it is extremely efficient. It provides both quantity and quality of impressions. Google Ads provides quantity based off of the foot traffic they receive. Google receives about 5.6 billion searches each day! Inevitably, these people are viewing and interacting with advertisements as they search. Since Google has immense knowledge about its users, it targets audiences with particular ads. This provides quality because people are much more likely to engage with ads that align with their interests. Regardless of the higher price, advertisers get a high “bang for their buck” due to the quantity and quality Google provides.
Facebook, one of the biggest social media platforms, is a publisher for CPM advertising. Like Google, Facebook is incredibly efficient.
Are Facebook Ads Worth it?
The CPM for Facebook Ads is currently around $7 per 1,000 impressions. Although seemingly very expensive compared to other publishers, Facebook also has high quantity and quality. Facebook Ads reach an incredibly large amount of people, as it has an algorithm very similar to Google. They are both advertising platforms that users should take advantage of. Yes, the ads are expensive, but the money they could generate for your business is unmatched. The amount of money you can make from your ad on Facebook significantly outweighs the high CPM. It does not matter that the ads are expensive because you will notice a much higher revenue. An important aspect to remember about CPM advertising is the cost does not matter as much as profit does.
Benefits of CPM Advertising
Benefits for Publishers
CPM advertising is incredibly beneficial for both advertisers and publishers. Publishers make money solely from publishing an ad on their site. It requires little to no work on their part and can be very profitable. For example, the app Flappy Bird was completely free to download, yet it made $50,000 a day off of in-app advertisements. Free mobile apps such as Flappy Bird would not be profitable without CPM advertising.
This is the same for an app such as Spotify. Spotify makes money whether you download the free version or if you purchase Spotify Premium. The only difference is how they generate the money off of these types of consumers. Spotify users who download the free app experience ads; whereas users who buy Spotify Premium have upgraded features as well as no ads. Either way, the publisher benefits.
Benefits for Advertisers
CPM advertising is beneficial for advertisers because it brings both brand awareness and the potential of revenue. The clicks and impressions from CPM marketing are important for brand awareness. Even if a viewer does not buy the product, exposure is key to growing the business. The more exposure a business has, the more likely it will find its target consumers. Additionally, it benefits the advertiser by giving them insights into their product audience. How different groups of people respond to the ads matters for the future success of your ads.
- What is CPM advertising?
- How much do Facebook ads cost?
- How do I calculate the cost per thousand of an ad?
- Why is CPM advertising good for businesses?
- What platforms use CPM advertising?