Cost Per Mille (CPM)
Cost per Mille (CPM) is also interchangeably used with Cost per Thousand (CPT). It is commonly used in the advertising industry whereby it refers to the number of advertising units bought on the basis of impression. CPM tries to give an assumption of the advertising units that can be bought if the advert was to reach an audience of one thousand people. CPM, in advertising, is used to determine the estimated cost of an advertising campaign or advertisement message when conducted or aired in a specified media. CPM can be calculated by dividing the cost of placing an advertisement in a specific media by the impressions (usually expressed in thousands) that the advertisement attracts. This can be summarized as:
CPM = (Estimated Cost/ Impressions generated)*1000
If a publisher charges a $3 CPM it therefore means that the party that is placing an advert must pay $3 for every a thousand views that the advert attains. To better understand how CPM works, consider an advertisement cost of $15,000 and the estimated audience is 2,400,000 people.
CPM = 0.00625 * 1,000
CPM = $ 6.25
In the above calculation, it is important to note that for the CPM to be calculated, the result from dividing the cost of the advert and the estimated audience must be multiplied by a thousand because of the need to include the ‘per a thousand’ clause.
Benefits of Understanding CPM
There are various reasons as to why businesses should consider CPM figures. Marketing is an important aspect of business and the best way to attain marketing is by placing adverts on mass and mainstream media. Therefore, CPM figures can help businesses be at a position where they can compare the costs of placing adverts on different types of media. New businesses planning initiate advertising campaigns and established businesses seeking to review their advertisement plans can rely on CPM figures to effectively determine how to manage advertisement costs that they may incur.
Comparing CPM to other Ad Costing Tools
CPM is considered the most effective mode of calculating and managing advertising costs as it takes into consideration the number of views that an advert attains. Other modes of calculating advertisements, while they may serve other purposes effectively, they may fail in some aspects. Pay per acquisition and pay per click fails to consider the fact that, by just viewing an advert, the audience may substantially make up their minds on whether to acquire or avoid the product being advertised.