Cost Per Thousand (CPM) Definition and Its Role in Marketing

What Does Cost Per Mille (CPM) Mean?

Cost per mille (CPM)—mille is Latin for thousand—is a pricing model used in digital marketing. It is the average cost a company pays for 1,000 advertisement impressions. An impression occurs when a consumer sees an advertisement.

CPM is a metric generally used in two ways: it can help companies measure how efficient their advertising is by telling them how much money is paid for 1,000 views of their website ad, and it can represent how much a digital publisher charges for advertising space.

Understanding Cost Per Mille (CPM)

Companies traditionally had only a few options to advertise their products and services—notably, through print, radio, and television. Over time, these options grew to include various types of online advertising. Several metrics have been created to help companies determine how well their advertising works. One of these is cost per mille (thousand).

Cost per mille is the most common method for pricing web ads in digital marketing. This method relies on impressions, which are defined as an advertisement displayed when a page is viewed. Impressions are generally considered ad views because it is likely they are seen when the page loads. Viewers may not do more than glance at it, but it is possible it still created awareness or made an impression.

An impression measures how many times an ad is displayed on a site. Impressions are counted, and metrics can be generated from the count. For example, many website owners charge advertisers a set fee for every 1,000 impressions of an ad.

CPM and Click-Through Rate

The click-through rate (CTR) measures whether an ad was clicked on, representing the percentage of people who saw and acted on it. Advertisers frequently measure the success of a CPM campaign by its CTR. An advertisement that receives two clicks for every 100 impressions has a 2% CTR. But you can't measure an advertisement's success by CTR alone because an ad that a reader views but doesn't click still may have an impact.

Cost Per Mille (CPM) vs. Cost Per Click (CPC) vs. Cost Per Acquisition (CPA)

CPM represents one of several methods used to price website ads. It is generally used with other metrics to help marketers analyze effectiveness and costs. These include:

• Cost-per-click (CPC): An advertiser pays each time a website visitor clicks on the ad. Cost per click is also known as pay per click.
• Cost-per-acquisition (CPA): The advertiser pays each time a website visitor completes a desired action, such as a view, follow, post, or other similar transaction that allows the company to acquire a new customer. This metric is also called the cost per action.

Special Considerations

There can be confusion between two crucial social media terms: impressions and views. The term impression refers to the presence of an ad or other content on a social media user's screen. A view, on the other hand, refers to the time a user engages with any digital content like a video.

The number of ad impressions can differ from the number of visitors to the website displaying the ad. An ad might receive placement in two locations on a website, such as a horizontal banner across the top of the page and a vertical side banner beside the page's text. The advertiser pays for two impressions per page view in this scenario.

Rates for social media advertising tend to be higher and can vary depending on the platform. The following is a list of average social media advertising costs on different social media sites:

Website publishers generally like CPM advertising because they're paid for just displaying ads. In some cases, a website needs robust traffic to make decent money from CPM ads because rates are relatively low.

Different pricing methods are more appropriate for some ad campaigns than others, like the ones mentioned above. CPM makes the most sense for a campaign focused on heightening brand awareness or delivering a specific message. The click-through rate matters less in this case because the exposure from having a prominent ad on a high-traffic website helps promote a company's brand name or message, even if visitors don't click on the ad.

The Bottom Line

Cost per mille, or cost per thousand, is the average cost for achieving 1,000 advertisement impressions regardless of the medium used. It is one of the figures used to charge advertisers for web ad pricing, as well as a metric used by companies to determine how successful and costly a marketing was or is.