Demystifying CPM Marketing: A Beginner’s Guide

We are accustomed to specific marketing metrics such as conversion rate and return on marketing investments. However, only experts can tell the CPM marketing definition. What is the mystery behind this term?

This article will answer the popular question, “What does CPM stand for in marketing?” We will define CPM, showcase specific use cases, and list its benefits. Read on to learn CPM advertising meaning.

What Is CPM?

Marketers define CPM as a cost per mille. In this case, mille means a thousand impressions. So, what does CPM mean, and how does it work? 

Suppose you run an ad campaign and show your ads to users. They see your ads on the gadgets’ screens. Each view or engagement means an impression was served to users. The money you’ve spent to focus readers’ attention on your ads and serve a thousand impressions is reflected in CPM.

If site visitors click your ad, that’s another story because clicks count differently. In this case, marketers calculate cost per click (CPC). This index reveals the average cost advertisers pay to get one click for their ad.

Evaluating impressions is more challenging than assessing clicks or other actions performed. With ad blocking software on the rise and ad fatigue becoming the new normal, you may face some problems evaluating campaign performance.

Since impressions are not valued and measured through interactions or clicks, it would help to think of them as potential views your ads may get. For instance, suppose 300 people saw your brand’s Instagram ad. It was displayed 500 times, but only 300 were unique views. It means that your ad reached 300 people, but the number of impressions served is 500 — it reflects the total number of chances users had to see your ad.

CPM in Marketing Explained

How does CPM marketing work? Here’s another example that will help you understand the process. Let’s say you have a $6,000 budget. You’ve created an ad campaign and launched it. One hundred thousand impressions were served during the first week.

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Now, you need to calculate your CPM. You will receive your CPM for this week when you divide your advertising budget by impressions and multiply the result by 1,000. See the CPM formula below.

Source: Business of Apps

Let’s calculate CPM in our case:

CPM= $6,000100,000×1,000= $60

Your CPM is $60, meaning you must pay $60 to get one thousand impressions served.

CPM is useful for brand awareness campaigns that manifest a specific message. The more users are aware of your company or a product, the more chances they will buy this product from you.

What Affects the CPM Rate?

CPM rate depends on various factors. Among the most influential are the following:

FactorsDescription
Supply and demand Your products’ popularity and availability may differ. Products and services with less demand or high supply would have a lower CRM rate than goods with higher demand and less supply. 
Season of the yearHolidays increase or decrease CPM rates. No one will search for gifts the next day after Christmas.
Content qualityThe better quality of your content means a high likelihood that users will view your ad. 
Ad formatThe size of the ad post and its visibility on different devices also matter.
Target audienceExposing an advertisement to your target audience is a natural way for success. 
PlatformWell-known platforms with higher traffic usually have a higher price tag. Consider saving your budget by placing your ad posts in media with less traffic. Learn what media your ideal customer usually uses for work and leisure, and publish your ad in that place.
LocationAdvertisement rates vary depending on regions, countries, cities, or states. 
Industry Banking, Fintech, the cryptocurrency market, and other high-value industries have higher price tags than industries with less complicated products. 
Ad campaign management Inefficient management of your advertising campaigns can deeply worsen any of your marketing metrics, including CPM.

Read the next part to learn common ways of utilizing CPM in advertising. 

Applications of CPM in Marketing

Traditional advertisement businesses before the online era (radio, TV, print) are familiar with CPM. But now, this indicator has become common for everyone wanting to promote their brand online.

Large brands such as Apple, Coca-Cola, Toyota, Mercedes-Benz, McDonalds, Nike, and other companies regularly use CPM ads for brand awareness. Cost per mille is also relevant for startups who have just begun their undertaking. They need to grow, so new companies strive to reach as many people as possible. 

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Enterprises, SMBs, and solopreneurs use CPM in marketing regardless of the ad medium. Here are the most common examples:

  • CPM Google ads is often used for viewable impressions. In this case, advertisers pay for impressions that were not just served, but at least 50% of the static ad unit was viewed, or a video ad was played longer than 2 seconds.
  • CPM email marketing is a trick many companies and agencies prefer to have up their sleeves. While brands mainly focus on other indicators for email campaigns, such as open rate (OR) and return on investment (ROI), it’s crucial for them to mind email marketing costs. 

When it comes to email ads, charging flat fees seems to be a more common approach than charging sponsors a CPM rate. But at the end of the day, it all comes down to putting numbers to the value offered to sponsors.

Benefits of CPM in Advertising

Using CPM in marketing has several strengths that aid in analyzing your advertisement campaigns. So, let’s reveal these upsides of CPM:

  • Ad campaign budgeting: CPM helps you determine what you need to spend on an advertising campaign to reach a specific number of people. With CPM, your marketing department uncovers the number of people to expose your ad copy to achieve a particular goal.
  • Brand awareness measurement: Companies use CPM metrics in ad campaigns for brand awareness. As mentioned above, it applies to well-established and new companies. Entities that plan to present themselves in new markets and regions could also use CPM metrics.  
  • Audience exposure assessment: The number of impressions tells marketers how often users view your ad copy on different platforms. CPM marketing analysis helps you choose media with a higher target audience reach. 

What about the cons of CPM in Marketing? Read about this matter further. 

Downsides of CPM in Advertising

There are several disadvantages of CPA as a marketing indicator:

  • You can’t use this index to determine how many people clicked your ad. Use such a conversion rate as a click-through rate (CTR) instead. This rate indicates the percentage of users who have clicked your ad copy among all who have seen it. 
  • One person could notice your ad copy on the screen not once but twice or several times. These situations harden the calculation of CPM.
  • Fake views and spammy content also don’t do any good for the usage of CPM in advertising. The assessment of this indicator will be inaccurate in this case. 

What Is a Good CPM Marketing? 

There’s no denying that CPM shouldn’t be a standalone metric for ad campaign analysis. Use CPM with click-through rates, open rates, and other metrics to depict the whole marketing picture of your efforts. On top of that, you should mind the disadvantages of the CPM metric: avoid spammy content and watch out for fake views by keeping tabs on your ad post analytics.