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What is Cost per mille?
CPM stands for Cost per mille, and "mille" is a Latin word meaning "thousand." Essentially, CPM is a metric in digital advertising that refers to the amount you pay for every 1,000 times your ad is shown to someone.
Let's say the CPM rate for your ad is $5. That means that the platform you are using will charge you $5 for every thousand impressions your ad receives. An impression is when someone sees your ad, regardless of whether they click on it or not.
The great thing about CPM is that it allows you to compare the costs of reaching different audiences or using different platforms. For example, if you want to reach your target audience, you can compare the CPM rates of various platforms to see which one gives you the best return on investment. CPM is also one of the factors to consider when planning an advertising budget.
However, CPM alone doesn't provide insights into how many people actually click on your ad. To measure your ad's effectiveness in driving clicks, look into your click-through and conversion rates.
CPM pricing model
Besides being a metric, CPM is also used as the name of a pricing model where advertisers pay for a thousand impressions of their ads. It's a good option for advertisers looking to raise brand visibility because ads will be shown to a large number of people. This makes it more likely that people will remember your brand next time they're ready to make a purchase. Other standard pricing models are CPC (Cost Per Click) and CPA (Cost Per Acquisition). In CPC, advertisers pay for each click on their ads, and in CPA, advertisers pay when a specific action is completed (such as a purchase or lead generation).
Here are some of the pros and cons of using CPM.
Pros:
- Allows to reach a large number of people.
- Relatively inexpensive.
Cons:
- Less effective for driving traffic to your website or generating leads than the CPC pricing model.
How to calculate CPM?
To calculate CPM, you'll need to know two things:
- The total cost of your advertising campaign.
- The number of impressions your ad received.
Once you have that, you should use the following formula to calculate CPM:
For example, if the total campaign cost was $100 and your ad received 10,000 impressions, your CPM would be $10.
What is a good CPM?
What's considered a good CPM can vary depending on several factors, including the industry, the type of ad you are running, and the advertising platform you use.
To get an idea of the CPM in your industry, take a closer look at your competitors' data. Start by identifying businesses that offer similar products or services and rank for similar keywords. Once you've pinpointed your competitors, it's time to dive into their keyword strategies. The goal here is to research the keywords they're bidding on. You can use SEMrush and other keyword research tools to help you with that. After gathering the data, analyze the CPM associated with competitors' keywords and compare it with your own data. However, while industry average CPM rates can serve as useful guides, remember that your primary focus should be achieving a positive return on investment and meeting the objectives of your marketing campaign.
Remember that your ad type will also affect the CPM you pay. For example, CPMs for display ads are typically lower than CPMs for video ads. Similarly, the platform you are advertising on will also affect your CPM. So, you may want to look for platforms with lower CPMs while considering the potential reach and quality of impressions they provide.
How to improve your CPM?
To improve your CPM, start by identifying key variables impacting your CPM, such as ad creatives, targeting options, ad placements, bidding strategies, and campaign settings. Once you have a baseline, choose and modify one variable while keeping other elements unchanged. Then, monitor how the performance change and compare the results with your baseline to see if it has decreased your CPM. If it has, then you know you are moving in the right direction. If you don't see a decrease, then roll back the change you made and start over. Keep repeating this process and working your way towards the combination of variables that lowers your CPM and maintains a strong campaign performance.