What does CPM stand for in advertising?
CPM is shorthand for cost per thousand impressions and is a common measure of volume in advertising. Used by both marketers as a benchmarking metric when deciding their advertising budget and also media providers when evaluating the value of their users, CPM is the most frequent metric to determine relative pricing and costs of an advertising campaign across several mediums. The CPM calculator works in multiple ways, to calculate either the cost, CPM, or number of impressions.
How to calculate CPM?
The formula to calculate CPM is straightforward. Since CPM is used to determine the cost per thousand, in order to calculate it you simply divide the cost by the number of impressions divided by a thousand. Below is the CPM formula and the reversed equations:
- CPM = 1000 * Cost / Impressions
- Cost = CPM * Impressions / 1000
- Impressions = 1000 * Cost / CPM
Why is CPM an important metric?
Online advertising has the unique advantage of easily being able to analyze and measure results. The cost per thousand impressions is regarded as one of the most important metrics to determine if the price you are paying to show ads is cost-effective for your business.
A lower CPM means that your ad is being displayed to users at a relatively small cost, while a high CPM means that you’re paying more per view. Don’t mistake this with value, as typically lower CPM ad buyers are typically lower quality, making it up to you to decide what the right price is for your business.
What is the average CPM for each ad type?
CPMs can vary widely based on a number of factors with one of them being the type of ad you are trying to buy. It won’t cost you the same to deliver a small ad on a website compared to a large video that takes over the whole screen.
What’s the difference between CPM, CPC, and CPA?
Similar to CPM, CPC (Cost per click) and CPA (Cost per acquisition) are also common pricing types for online advertising.
CPC – Stands for Cost Per Click
, meaning you pay for every time someone clicks on one of your ads. This can be very useful when promoting an specific product or service in a niche market and is regarded as less risky since you ensure users are taking action.
CPA – Stands for Cost Per Acquisition
, meaning you only pay when a purchase is made as a result of a user clicking on the ad and purchasing your product. This is a great metric to track true return on ad spend since it reflects the actual revenue you are making back from advertising.