CPM is the cost per thousand impressions on a given website and is used to price online advertising. The "M" in CPM stands for mille, which means thousand in Latin.
Learn more about how CPM works in advertising.
What Is CPM?
CPM is an industry term used to talk about the cost of ad impressions in digital advertising. It refers to the cost of 1,000 advertisement impressions on a website. It shouldn't be confused for other similar terms like CPC (cost per click) and CPA (cost per action).
When you buy digital advertising, you may pay based on CPM. For example, you might pay $4 CPM for your business to advertise on a website. If your ad has 150,000 impressions, you'd pay $600.
How CPM Works
CPM is used to buy and sell ad space on social media, search engines, and websites. Let’s say you have a website, and you want to sell advertising space. If your website is new and has relatively little traffic, you're not going to earn a lot of money, so your CPM will be very low. If your website has high traffic, the CPM will be higher.
There are two different kinds of CPM rates: fixed and variable. Fixed rates are easier to work with as you have a definite value to put against the ad impressions generated. Variable CPMs are a little more difficult to work with, and these rates will differ based on your website’s topic, the country you're in, the advertiser, and so on.
Let’s do some quick math: You own a website and it averages 40,000 visitors and 120,000 page views per month. If advertisers pay a CPM of $3 (which is slightly above the average for 2019), you would calculate it this way:
120,000 / 1,000 = 120
120 x CPM $3 = $360
Multiply that by 12 and you’re looking at a website with a value of $4,320 in ad revenue per year. When you consider the many millions of page views some websites serve every month, you can see how profitable CPM marketing is.
Criticisms of CPM
Sometimes known as a view or an ad view, one ad impression takes place when an ad server is asked to respond to a page request from a user’s browser. This doesn't mean the ad is actually seen by anyone. Some advertisers mistakenly think that ad impressions are ads that were shown to a user (whether they notice it or not) on a website or other online medium.
Ad impressions may not equate to actual ad views for several reasons. The ads served may not be correct or the ad impressions may be from bot traffic. A bot is an automated piece of software that can be used to boost traffic numbers.
There's also ad impression fraud. In this case, website publishers hide ads behind other ads, which tricks the ad networks into placing ads with higher CPMs on the site. Publishers may also engage in pixel stuffing, which is when an ad is inserted into one pixel, which means it's technically visible, but no one can actually see it. This boosts ad impression numbers, costing advertisers even more.
According to Google, 56.1% of impressions aren't actually seen by anyone.
CPM vs. CPC
|Cost per thousand||Cost per click|
|Best for visibility and brand awareness||Best for specific campaigns|
Cost per click (CPC) is another option for digital advertising. As the name indicates, CPC requires an advertiser to pay each time someone clicks on an ad rather than each ad impression.
CPM tends to be less expensive, while CPC is more action-oriented. You're only paying when someone engages with the ad. If you're looking for brand awareness and visibility, CPM may be the best option. If you're focusing on reaching a target audience and getting them to take action, CPC may be a better fit.
- CPM is the cost per thousand impressions on a given website and is used to price online advertising.
- CPM can be used to buy and sell ad space on social media, search engines, and websites.
- Ad impressions are when an ad server is being called from a browser. It doesn't necessarily mean anyone has seen the ad, as there's significant ad impression fraud.
- CPM is best for brand awareness. CPC is best for more targeted, action-oriented campaigns.