How To Calculate CPM

How to Calculate CPM: The term CPM is short for “Cost Per Thousand.” It’s used to determine the price of every one thousand impressions on an advertisement.

What Is CPM?

The term CPM is short for “Cost Per Thousand,” also known as the Cost Per Mille. It is a marketing term that is used to determine the price of every one thousand impressions on an advertisement. This makes CPM a highly useful metric when it comes to determining the return on investment of an ad, as a higher total number of impressions means a higher number of views.

An effective CPM campaign can be one of the best forms of digital advertising that exists, as it can help to get your ad in front of thousands of people, thus dramatically increasing your potential customers. We offer CPM campaign management as part of our growth services.

You can typically limit your ad spend by a certain number, thus ensuring that your advertisement gets pulled down before you exceed your advertising budget. It can also be a highly effective form of digital marketing for website owners, as they can turn their website into advertising space and use it to generate ad revenue. 

Where Is CPM Most Often Used?

A CPM model is typically used for advertisements that are meant to be seen by large numbers of people. As such, they aren’t geared to be as highly targeted as some ads are. Instead, these ads are meant to be seen by as many eyes as possible to increase brand awareness. They can be used for a variety of reasons, including to advertise a specific product or increase knowledge about user experience with their product or service. 

A CPM model of advertising usually works on ad networks where the goal is to have an advertisement seen in as many places as possible. It is essentially an online billboard and is often used on websites with heavy traffic, websites that have agreements with certain ad networks, or social media. 

What Is eCPM? How Is eCPM Different From CPM?

eCPM is the effective cost per thousand impressions. It uses multiple ads to determine the cost of a campaign. As such, it can generate a number and can be seen as an average of all campaigns. It is determined by dividing total ad revenue by total ad impressions, then multiplying that number by a thousand. The key difference between these two numbers is that CPM deals with just one ad, while eCPM deals with multiple ads like an entire ad campaign. 

How Do You Calculate CPM?

There are many ways to determine the CPM rate of an ad. Most advertisers will have some sort of CPM calculator, and this can be used to easily determine the overall cost. 

If you don’t have a CPM calculator available, the CPM formula is as follows: The total cost of an ad / the number of impressions that ad receives, multiplied by one thousand.

Using this formula makes calculating CPM easy and can help you determine ad costs. 

What Is CPC?

CPC stands for cost per click. It is the cost that an advertiser will pay for every click on an ad, and it is used to determine the costs of a pay-per-click (PPC) advertising campaign. Along with the conversion rate of an ad, CPC can be a good metric for figuring out if your ad has been successful. 

CPC can be used in multiple ways. On the one hand, an advertiser can “bid” on an ad slot on a website, offering to pay for a certain number of clicks. The number of times that an ad is clicked on is also known as the CTR, or click-through rate. Alternatively, CPC can be another metric that is used and calculated as part of a CPM campaign. The primary goal of a CPM campaign may not be to drive high click-throughs, but it can still be a good number to have as a proxy for the effectiveness of an ad campaign and advertising cost. 

What Is CPA?

CPA is another pricing model that is used in online advertising. It is short for cost per action. CPA campaigns are a bit more targeted in terms of their desired results. For example, this “action” that you are paying for might be getting someone to submit their email through a form. Let’s say this costs you $2 per email. Your CPA here would be $2 per email.

When Should You Use CPM?

As a general rule, CPM is for broad-based appearances. Think Super Bowl advertising. They are designed to increase brand awareness and make sure that customers are familiar with your business. They are not built for specific, microtargeted conversions – CPC campaigns are more appropriate there. Think of CPM campaigns as being an ax in your toolbelt, while CPC campaigns are more like a scalpel. 

How Do You Combat Fraud Linked to CPM?

Unfortunately, fraud related to CPM is very real, as bots can repeatedly view websites, thus driving up advertising costs. Thankfully, there are many ways to combat this fraud. They include:

  • Maintaining appropriate files that can be used for purposes of monitoring and detecting fraud, like ads.txt files.
  • Creating custom alerts with tools like Google that can trigger when fraud has been detected.
  • Using third-party software to monitor fraud.
  • Being extremely careful and selective with the agencies that you partner with.