Cost per mille, or CPM for short, is a pricing model used by Google Ads where you pay for every thousand times your ad is displayed. As the online advertising industry continues to expand (programmatic advertising now accounts for more than 89% of all digital display advertising), it's important to understand some of the key terms driving digital advertising, including CPM, one of the most popular pricing models in programmatic advertising.
The CPM (cost per mille) pricing model is a commonly used metric in online marketing, particularly when using website advertising. It allows advertisers to better control and plan the costs of their advertising campaigns by giving them a clear idea of how many impressions they can expect for their budget. CPM is especially useful for measuring the effectiveness of advertising campaigns because it is easy to understand and calculate. However, other pricing models, such as CPC (cost per click) and CPA (cost per action), are also used in the online marketing industry and offer alternative ways to measure the effectiveness of advertising campaigns.
The CPM pricing model is ideally suited for branding campaigns or campaigns aimed at increasing reach and brand awareness. This is because, with CPM campaigns, advertisers purchase ad impressions, thereby drawing more attention to their advertising.
It's obvious you don't want to overpay for ad impressions. Ad views are great, but if they don't generate ad revenue from your target audience, they're not very valuable. A good way to determine if you're paying too much is to check the industry benchmark for the online advertising you're running. Paying more could indicate a poor CPM. However, keep in mind that a lower CPM isn't always good either, as it can point to low-quality traffic. So, track this along with your cost per click (CPC), click-through rate (CTR), and return on investment (ROI).
As the name suggests, you simply need to divide your average advertising costs by your average number of impressions and then multiply this by one thousand.
For example: If an advertisement costs you 20.000 CHF and receives 10 million impressions, then the CPM would be 2 CHF.
Some advertisers are choosing CPM instead of other performance-based metrics such as PPC (Pay-per-Click). This is because CPM:
When advertisers choose to use the CPM pricing strategy, they are guaranteed a fixed price for the number of impressions. This is especially important for campaigns with a budget.
Cheap:
CPM is a cost-effective advertising option to reach a larger audience. Online presence The goal is to gain exposure and spread the message without overstretching the advertising budget. However, it's not designed to drive action through clicks, but rather to generate views. Therefore, CPM (cost per mille) depends on the advertiser's strategy and business objectives.
Brand awareness:
CPM is excellent for building brand awareness and offers a cost-effective way to promote your brand. It leaves a lasting impression on viewers, even without requiring any specific action. Building brand awareness is a key factor in successful marketing campaigns and can lead to greater customer loyalty later on.
Guaranteed number of impressions:
This model guarantees advertisers a specific number of impressions, specifically targeted to their audience. If you're advertising on a page you know is well-represented by your target audience, CPM is a great way to know how many times your target audience has seen your ad. You know exactly how many visitors from that page were exposed to your message.
The quality of the traffic is unknown:
One disadvantage of CPM is that it offers no guarantee of traffic quality. It's difficult to determine ad success, as the traffic may be unverified, and there's no guarantee that views come from new and genuine visitors. In contrast, the cost-per-click (CPC) model offers greater engagement and transparency because it ensures ads are seen by real people. CPM often leaves advertisers wondering where their money is actually going.
Fraud and inaccurate statistics:
With CPM (cost per mille), there's a risk of fake impressions or the same person viewing the same ad multiple times, leading to inaccurate statistics and costs. It's difficult to know how many ads are actually seen by real traffic. Technology is being developed to improve this, but it remains a drawback of the CPM model.
Actions or clicks cannot be measured:
CPM can provide inaccurate statistics, and it's difficult to determine how many people click on an ad or take action. This might be acceptable for some advertising strategies focused solely on brand awareness, but it's not the best model for ads with a call to action. In this case, the pay-per-click (CPC) model is a better choice, as it ensures that the ads are seen by real people and that actions are measurable. It all depends on the business's needs.
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