What it means
In a CPM deal, the advertiser pays a set price for every 1,000 times the advert is shown, called impressions. It does not matter whether anyone clicks or buys.
The model suits brand awareness campaigns, where the aim is to be seen by many people rather than to generate immediate sales. CPM lets marketers compare very different options on a common scale.
A national magazine, a video platform and a podcast all have different audience sizes and prices, but dividing each cost by thousands of impressions gives one comparable figure. The lowest CPM is not always best, because audience quality and relevance matter.
CPM also helps with budgeting. If a campaign aims for 2,000,000 impressions and the expected CPM is $8, the media cost is easy to calculate.
The finance team can then check this against the target audience size, the number of times each person is expected to see the advert and the planned outcome. Prices vary with the audience and the format.
Reaching senior executives or high-income shoppers usually costs more than reaching a general audience, and video adverts tend to cost more than static banners. Seasonal demand also moves the price, with the weeks before major holidays typically more expensive.
The weakness of CPM is that it counts exposure, not effect. An advert may be shown in the wrong place, to the wrong people or in a position nobody sees, so many advertisers also track viewability (whether the advert was actually in view) and later conversions.
Used alone, CPM can make a campaign look efficient even when it produces no sales. Combining CPM with click-through rate and conversion rate gives a fuller picture.
The team can then see how efficiently exposure turns into customers.
In practice
Real-world examples.
Example
A consumer brand buys video adverts at a $10 CPM and wants to reach 3,000,000 impressions. The media cost is 3,000 x $10 = $30,000. The campaign needs a second budget line for the creative work.
Example
A software start-up compares a trade magazine charging a $45 CPM with a social platform charging $9. It chooses the magazine for a launch aimed at finance directors, because the audience is more relevant. The finance team judges the difference worthwhile because wasted exposure costs money even at a low price.
Example
A radio station sells advertising slots at a $6 CPM during the morning drive. The sales manager explains that the price rises to $9 for the run-up to the holiday season. Buying early in the quarter would have locked in the lower price.
Formula
Calculation
CPM = (Total cost / Number of impressions) x 1,000
A company spends $5,000 on a campaign that delivers 400,000 impressions.
Cost per impression = $5,000 / 400,000 = $0.0125.
CPM = $0.0125 x 1,000 = $12.50.
To reach 1,000,000 impressions at the same CPM, the cost would be 1,000 x $12.50 = $12,500. Check: 400,000 impressions is 400 thousands, and $5,000 / 400 = $12.50.Case study
Seen in the real world.
Lakeshore Outdoors is an illustrative, fictional camping gear retailer that ran two awareness campaigns. One cost $8,000 and delivered 1,000,000 impressions, a CPM of $8, while the other cost $9,000 and delivered 600,000 impressions, a CPM of $15. Both campaigns ran for the same four weeks.
The marketing manager preferred the cheaper campaign until the finance analyst compared sales. The more expensive campaign, which targeted people who had searched for hiking routes, produced three times as many orders. He based his view on the headline CPM, which was almost half the price.
In this illustrative case, the company moved most of its budget to the higher CPM option. The story shows that a low CPM means cheap exposure, but a higher CPM can still deliver a lower cost per customer when the audience is better. The company now judges awareness campaigns by cost per order as well as CPM.
Watch out
Common mistakes.
- Choosing the lowest CPM without considering whether the audience is relevant to the product.
- Treating impressions as sales, when an impression means only that an advert was shown.
- Forgetting that the "thousand" in CPM is the unit, so a $12 CPM means $12 per 1,000 impressions, not $12 per impression.
Questions
People also ask.
Why is it called mille?
It comes from the Latin word for thousand, and the letter M in CPM refers to it. The abbreviation is common in print, broadcast and digital advertising.
How is CPM different from CPC?
CPM charges for every 1,000 times the advert is shown, while CPC charges only when someone clicks.
What is a good CPM?
There is no universal number; it depends on the platform, format and audience, so compare it with your results and your customer value. Compare options for the same audience, not across completely different ones.
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