CPM is a term used in online marketing to refer to the cost of a company’s advertising for every 1,000 impressions. It is commonly used with impression advertising and is used to measure the cost of other advertising vehicles. CPM is important for cost control, especially for new businesses.
Cost per thousand (CPM) is an element of online marketing that refers to how much a company’s advertising costs for every 1,000 impressions. This term is most commonly used with impression advertising, where the business’s banner is displayed on a website and the business is charged for every 1,000 ad impressions or views. CPM in online advertising is also used to measure how much other advertising vehicles cost, so the business knows the most effective keywords to bid on. Another role of CPM in online advertising is cost control, especially with new businesses, so the business doesn’t overspend its advertising budget.
CPM in online advertising is a term used most frequently with impression marketing, where a company commissions an advertising hub or single website to display the company banner. For example, if a website says that businesses can market a CPM of $5 United States Dollars (USD) on the site, then the website is saying that the business will get its ad 1,000 times for $5 USD. This is much easier than saying each ad costs $0.005 USD and gives the business a much better understanding of what they are spending. It’s estimated that about 1 percent of all online users will react to an ad, so that makes 1,000 a good number for business analysts to work with.
While CPM in online advertising is usually associated with impression marketing, it can also be associated with other marketing methods so that businesses know how much they are spending. In cost-per-click (CPC) advertising, the business pays for ad clicks; this tells the business how much it spends per click, but it’s unrealistic to assume that every user will click on the ad. Analysts usually measure how often an ad is clicked and companies use this to bid on the most effective keyword. If an ad costs $2 USD per click and it is estimated that the ad will be clicked 20 times out of 1,000, the CPM is $40 USD.
One of the major roles of CPM in online advertising is cost control, especially for new businesses. If an online business has a small marketing budget, they can’t afford to spend money if they don’t see results, and can only buy several thousand impressions. By only purchasing several thousand and not running the ad constantly, the business will be able to reach many potential customers without going over budget. This also allows the company to estimate and plan for online advertising costs.
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