In the ever-changing world of digital advertising, reaching a larger audience is crucial for leading your potential customers through the marketing funnel, from brand awareness to consideration and, later on, converting and advocating for your brand.
Here is where the CPM pricing model comes into play, helping businesses reach out in a data-driven and cost-efficient way to monetize their offerings better.
So, if you’re on a mission to increase your brand recognition, the cost-per-thousands (CPM) could be the right solution you’ve been looking for.
If you’re still wondering What CPM is, you’ve landed on the right page! In today’s guide, we will discuss anything you need to know about CPM and how to harness it in your business’s favor.
What Does CPM Mean in Digital Marketing?
Cost-per-mille, or cost-per-thousand (impressions), or simply CPM, calculates the total ad spent for 1,000 impressions on a web page, which is the amount of money an advertiser pays for every thousand potential customers reached.
In essence, CPM is a marketing metric used in ad campaigns to reach bigger audiences of thousands of users, and it gets triggered each time an ad is displayed to the target audience.
Within the marketing landscape, CPM evaluates the effectiveness of your marketing campaigns, thus helping you make informed decisions and better strategize your next move while optimizing your campaign budgets.
For example, if the CPM is $40 across various ad networks, including Google Display Network (GDN), the advertisers must pay $40 per 1,000 ad views. Depending on how the campaigns run, the advertiser must pay the same rate every time the ad receives 1,000 impressions.
While CPM helps you understand your reach, it only tells part of the story. To truly measure the effectiveness of your campaign, you need to consider other metrics like Click-Through-Rate (CTR). CTR tells you the percentage of people who saw and clicked on your ad.
A high CTR combined with a reasonable CPM can indicate a successful campaign driving user engagement.
Moreover, it is essential to understand that you cannot calculate your advertisement outcome by using only Click-Through-Rate alone, as the potential customer could still be influenced by your ad, even though it did not click on it.
When it comes to the importance of CPM, there are two faces of the same coin:
- It helps brands and advertisers to measure how efficient are their advertising efforts;
- It represents how much a digital publisher charges for their advertising space.
As such, CPM is often used to increase brand awareness through display ads in the form of ad banners since the pricing model focuses more on exposure than the cost-per-click model.
How to Calculate CPM
As an advertiser, it is essential to calculate your CPM, yet this is a simple process: divide the total cost of the campaign by the number of impressions; multiply by 1,000, and there you have your CPM percentage rate.
- CPM = (cost ÷ impressions) × 1000
Impressions vs. Reach vs. Page Views
As we’ve learned more about the CPM pricing model and its role in the digital marketing landscape, it is essential to understand the relationship between impressions vs. reach vs. page views.
As we all know, CPM is directly related to the impression metric. However, mixing it with reach and page views is common, and as a result, in the following paragraphs, we will take a deeper dive and see the main differentiators.
As a result, you’ll be able to optimize your ad campaign budget efficiently and better understand your target audience size while analyzing your content performance. So, let’s jump in!
Impressions vs. Reach vs. Page Views: At a Glance
| Marketing Metric | Focus | Use Cases |
|---|---|---|
| Impressions | The number of times your advertisement is displayed on people’s feeds, regardless of the medium and whether it was clicked or not. | Measuring content’s visibility to optimize ad spending. |
| Reach | The total number of unique people who saw your media content, meaning your ads. | Understanding audience size and identifying target audience effectiveness. |
| Page Views | The total number of pages viewed, loaded, or reloaded. | Analyzes content performance to improve the website content and design. It gives a key insight into the user’s behavior. |
Let’s take a simple analogy to see exactly how these apply. For example, you have an ad about your free crypto airdrop, and you advertise it to your target audience.
Impressions represent the total number of times your Free Crypto Airdrop ad is displayed across different platforms, such as social media, websites, etc.
Let’s say you run your campaign two weeks before the airdrop launch date – reach is how many unique people saw your ad within the campaign’s time frame.
Lastly, page views could be how many people opened the airdrop dedicated web page, regardless of whether it was the same user visiting multiple times.
What is a Good CPM?
A good CPM depends on various factors, such as the ad tech platform type, ad network – Google Ads, and Supply-Side Platform – Sevio Ad Manager, industry benchmarks, campaign objectives, click-through rates, etc.
By looking at different CPM benchmarks, you can see how successful your ad campaign is in any industry. Moreover, by knowing the lowest CPMs, you can better manage your campaign budgets.
Now, let’s discover some industry benchmarks so you can have a rough idea of what to expect, depending on your industry.
CPM Benchmarks by Industry & Ad Spent by Platform
SemRush did a CPM benchmark study within the US for 2021-2023, highlighting that the Food Delivery industry had the highest CPMs at $7.63 compared to other sectors, such as the travel industry, finance, and even the SaaS landscape.
On the other hand, specific sectors, like Dating or Media, had lower CPMs, thus showcasing that in-app ads take the lead compared to the classic desktop ads.
CPM by Ad Type
As we enjoyed a glimpse into different industries, it was the type to see what different ad types CPMs perform and how using specific platforms influences the cost per mile.
As we can see, the most expensive ad types were video ads, with an average cost between $11.10 – $9, regardless of the kind, such as mobile, in-app, or social.
In contrast, depending on their type, display ads are at a quarter or half of video ads’ CPMs, with values between $5.5 and $2.5.
Meta Ads CPM
However, if we discuss the average Meta ads CPM in Europe for 2022 – 2024, we can see that the average CPM was 1.27€, whereas the median CPM dropped 0.86€ from 1.09€ as of the last month of the previous year, according to Statista.
CPM vs. Other Pricing Models
CPM isn’t the only pricing model for your advertising campaign, so it is mandatory to see the differences between CPM and other pricing models, such as the CPC, CPA, CPI, CPV, CPL, and CPD.
What is essential to know is that each pricing model corresponds to different stages of the customer journey, such as:
Top of The Funnel (TOFU): Brand Awareness
- CPM (Cost-per-Mille);
- CPD (Cost-per-Day).
Middle of Funnel (MOFU): Consideration
- CPC (Cost-per-Click);
- CPV (Cost-per-View);
- CPL (Cost-per-Lead);
- CPI (Cost-per-Install).
Bottom of Funnel (BOFU): Decision and Conversion
- CPA (Cost Per Action);
Now, let’s analyze each one and compare them to CPM, as Sevio Ad Manager offers three of the most accessible pricing models: CPM, where the publisher gets paid for every one thousand ad displays, CPC which incentivizes publishers based on the ad’s number of clicks and CPD, which requires advertisers pay a fixed amount for their ad to be displayed for an entire day.
CPM vs. CPC
We’ll start with Cost-per-Mille and Cost-per-Click, as these are the two most common pricing models used in the digital advertising landscape, and each pricing model offers its advantages for specific campaign objectives.
CPM campaigns depend on ad impressions, whereas advertisers pay for 1,000 impressions. As a result, knowing your CPM allows you to budget your campaign efficiently for your target audience.
The CPM strategy caters to increased brand exposure, regardless of the CTR or the number of clicks.
In contrast, CPC, or Pay-per-Click, is an online ad revenue model for what the publisher charges advertisers each time a user clicks on the ad.
CPC campaigns are click-based, measuring the number of clicks an ad receives, and such models are used for driving traffic and generating conversions.
Depending on a business campaign’s goals, choosing between CPM-based campaigns or CPC campaigns could be the way to ensure an adequate cost-result report.
CPC marketing is known for being more costly compared to its adversary and often time is used in lead generation campaigns, driving traffic, and conversions.
CPM vs. CPA
CPA, also known as Cost-per-Action or acquisition, is an ad pricing model that charges advertisers to complete a particular action, such as downloading something, finalizing a purchase, and others.
The CPA model is best used for brands that engage in affiliate marketing, yet many publishers are on the edge until the conversion is completed.
However, if we compare CPA with CPC, we could safely say that the CPC model presents a lower risk for publishers, as they get incentivized once the user clicks on the ad instead of waiting for a consumer acquisition.
CPM vs. CPI
Cost-per-install, or simply put, CPI, just as the name says, is a model that monitors the rate an advertiser pays to acquire new customers through app installation.
If 2009 brands paid 99 cents, in 2023, iOS’s global CPI was $3.6, and Android’s global CPI was $1.22. Also, based on studies done in 2022, the average CPI for a shopping app on iOS was around $3, compared to $2.24 on Android, compared to CPA.
As you can see, both CPM and CPI have different advertising scopes, but if you are a SaaS business that just launched its mobile app, you could go for the CMP model to increase your brand awareness and the CPI model for app installs.
CPM vs. CPL
At its core, Cost-per-Lead is a type of cost-per-acquisition and represents the sum that an advertiser pays for each generated lead due to the online ad campaign.
CPL stands for cost per lead and is essentially a type of CPA. CPL is the amount advertisers pay for each lead generated due to an advertisement.
Moreover, CPL is most used in eCommerce, but it’s not limited to it, as it is an excellent opportunity to grasp potential customers’ data for business databases.
CPM is about visibility, whereas CPL is about generating interest.
CPM vs. CPD
As CPM is the term used for the price of a thousand impressions, regardless of the ad format, CPM is at the top of the marketing funnel.
However, CPD, or cost-per-day, is a flat rate buyers pay per day the advertisement displays, regardless of the number of impressions. CPD is less known, even though it focuses on a consistent ad presence throughout the day, and it is best to be used on time-sensitive promotions.
For publishers, CPD seems like a fair trade offering a steady and predictable revenue stream. On the other hand, for brands, CPD could be good for promoting limited-time offers on high-traffic websites.
So, as we’ve ended this extensive chapter, we hope you now know how different types of pricing cater to different campaign objectives.
Pros and Cons of CPM
CPM Advertising Pros
1. Increased Brand Awareness
CPM campaigns boost your brand visibility by reaching a broader audience, especially since you pay for impressions. As a result, the CPM pricing strategy could be helpful for brands that aim to promote their newly launched products.
2. Cost Efficient
Another pro for advertisers is that with this pricing model, brands only pay for a thousand impressions, not acquisitions, leads, clicks, or others, as seen in CPA, CPL, or CPC.
3. Data-Driven Insights
CPM campaigns offer vital insights so that brands can track and measure the effectiveness of their campaigns. As such, brands can use impressions, clicks, CTRs, and others to make informed decisions.
CPM Advertising Cons
1. Questionable Quality
Indeed, CPM has its bright sides, but in contrast, brands often question the quality of impressions, as it focuses on the quantity rather than the quality of impressions.
2. Impressions, Not Actions
When using the CPM model, there’s always a chance to reach an irrelevant audience, which leads to wasted impressions and users not taking proper action.
3. Difficulty Measuring ROI
As the name says, cost-per-thousand impressions don’t necessarily help brands measure their return on investment (ROI), as it’s hard to quantify impressions.
When to Use CPM Advertising
As mentioned, CPM is relevant when your brand must reach a broader audience, and raising brand awareness is the primary goal. But let’s discover potential use cases together!
- Launching a new product or service requires brands to create a buzz.
- CPM can be used for seasonal promotions or events to reach a wider audience.
- CPM can be used to retarget website visitors that didn’t convert.
- Build brand recognition, especially in challenging competitive markets.
- CPM can be used to promote website content depending on the brand’s niche.
Tips for a Successful CPM Campaign
With all the information, it’s time to see what it takes to successfully implement a CPM campaign. As a result, we’ve highlighted some of the most important aspects that any brand must consider before setting up its CPM campaign.
1. Set Clear Budget and Objectives
First, you must determine the CPM campaign objective from the beginning. Do you want to reach a broader audience? Promote your products? Advertise an event or conference?
Whatever the goal, it is essential to analyze whether choosing CPM could bring you closer to your goals or if you need a different approach. But let’s say your goal can be achieved with a CPM strategy. Then, you must ask yourself how much you will invest to determine campaign budgets.
Moreover, given that you can research average CPMs based on industry benchmarks and with the help of different ad network platforms, estimating a budget is one of the keys.
2. Set a Specific Time Frame
As with any campaign, determining a specific time frame to run your campaign can be helpful when, in the end, you’re measuring your marketing campaign efforts.
Let’s say you advertise a concert, use the CPM model with an audience of 1000 potential participants, and run your campaign two weeks in advance.
For example, if your CPM is $5, and you run it for 14 days, with a target audience of 1000 potential participants, this means that daily, you must reach 72 potential participants if rounded up.
When doing the math, you could see those 72 daily impressions * 14 days = 1008 participants. 1008 * $5 / 1000 = $5.04.
*Please note that this is just an example, and often platforms don’t allow for such specific targeting.
3. Pick Your Platforms
There are many platforms that advertisers can use to leverage their CPM strategies better, such as Google AdSense, Criteo, and others.
Managing your CPM strategies can be daunting, regardless of whether you are a small or experienced advertiser. However, anything is possible with the right platform and experts on your side, such as Sevio Ad Manager.
Moreover, Sevio’s custom ad sizes, along with their creative gallery, let you quickly store, share, and deliver their creatives, whether they’re static ads, HTML, or JavaScript, and set ad priorities to make sure your most important ads are seen first, and picked, could make you stand out from the crowd.
For more details on our available pricing models, please check our guide on Pricing Models Explained.
4. Split-test Your Ads
Split testing, or A/B testing, is a marketing technique that allows you to divide your target audience into two separate ones and perform different campaign variations to determine which performs better.
Simply put, you can display a distinct ad type for audience A and for audience B, display a different version, but both convey the same concept.
As such, you can test and determine the overall impact and analyze what key differentiator has brought the best results to strategize your ad campaigns better.
5. Monitor the Ad Delivery and Results
Lastly, carefully monitor your ad delivery and results to draw solid and data-driven conclusions, which can be helpful for future campaigns.
For instance, if you run a brand awareness campaign, you can correlate its performance with brands’ organic growth searches or the direct traffic toward your website and measure the impact.
It is mandatory to understand that an ad campaign could not thrive without monitoring its results, as if a user could not access your ad with a broken link.
Final Thoughts
As we’ve reached the end of this comprehensive guide, we hope that by now, you’ve grasped the power of CPM in advertising, and you’ll remember that it could be a valuable tool for raising your brand awareness.
As a last tip, weigh the pros and cons and compare it against other pricing models, depending on your marketing goals.
Are you ready to leverage CPM in your next campaign?
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