Understanding Cost Per Thousand (CPM) in Digital Marketing Metrics

What Does Cost Per Thousand (CPM) Mean?

In digital marketing, cost per thousand (CPM) is the average cost a company pays for 1,000 advertisement impressions. CPM can be used as a pricing model and as a metric. Where pricing is concerned, a digital publisher uses CPM to charge a company for advertising space based on projections for the number of impressions their advertisement will receive. When used as a metric, it can help companies measure how efficient their advertising efforts are by showing how much they are paying for 1,000 views of their digital ads. Incorrect counting of impressions can occur due to duplicate views, advertisements that fail to load, and advertising fraud.

In-Depth Look at CPM in Digital Marketing

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 thousand (CPM).

Cost per thousand (CPM) is a common way to price ads online. It counts how many times people see an ad, even if they don't click on it. The idea is that just seeing the ad might create awareness about the product or service.

Advertisers and digital publishers count impressions, and metrics can be generated from their counts. Many websites charge a specific fee for every 1,000 times an ad is viewed.

How CPM Relates to Click-Through Rate (CTR)

The click-through rate (CTR) is a metric that measures how often an ad is clicked on. Advertisers frequently measure the success of an advertising campaign by its click-through rate because it's preferable for a consumer to click on an ad (versus just viewing the ad).

Comparing CPM, CPC, and CPA: Choosing the Right Model

CPM is one of several methods used to price website ads. It is generally used alongside other metrics—cost-per-click (CPC) and cost-per-acquisition (CPA)—to help marketers analyze the effectiveness of their ads.

• 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): An advertiser pays each time a website visitor completes a desired action, such as viewing an ad or—if the advertisement is shared on a social media platform—, following, posting, or other similar type of audience engagement.

Key Considerations for Using CPM in Advertising

In social media advertising, two key terms are impressions and views. An impression is when an ad appears on a screen. A view is when a user interacts with content, like watching a video..

Social media ad rates are usually higher and can change based on the platform.

The Bottom Line

Cost per thousand (CPM) is the average cost for 1,000 advertisement impressions. CPM has a dual role as a pricing model and a metric for measuring advertising efficiency. The number of impressions can impact advertising campaigns, even if they don't result in clicks or direct engagement. CPM is commonly used in conjunction with other pricing models like cost-per-click (CPC) and cost-per-acquisition (CPA) to offer a more comprehensive analysis of ad effectiveness. The potential limitations of using CPM alone as a metric include the possibility of counting duplicate views and its susceptibility to advertising fraud.