Do you often wonder what CPM means in advertising? With the innovative ideas springing up every day to increase business productivity and thus, increase profitability, advertising has been torn into shreds to figure out the little things that make up the bunch.
Digital advertising is a huge bulk that contains a lot but as bulky as it looks, it is indeed small and easy to grasp.
In this article, we would be looking at what CPM means in the advertising world, what a good CPM rate should mean for your business’ advertising efforts, how best to calculate CPM, and how it helps your business if done right.
CPM In Advertising
CPM is an acronym for “Cost-Per-Mille”, where “mille” is the Latin word for a thousand.
This means that CPM stands for the Cost-Per-Thousand “impressions.”
“Impression” is a term used to describe the metric that counts the number of ad views or viewer engagements that an advertisement receives while the campaign lasted.
What this means is that you only have to pay for the number of times your advert is displayed per a thousand times.
Let us bring it down a little further. CPM in advertising is the money or amount advertisers pay to any advert publisher (Facebook inc., Google Display Network, etc.) for every one thousand times your advert is seen.
For instance, if you pay $2 to an advertiser per CPM, you will have to pay $4 if your ad generates 2,000 impressions or is seen 2,000 times and $6 for 3,000 impressions.
This pricing model is mostly employed in online or digital advertising and has become the most common method for pricing any form of digital advertising.
What Is A Good CPM Rate?
Every business that runs an advert probably has an advertisement budget.
The question now becomes: what is a good CPM rate that would enable you to get the most out of your budget?
Since advertising works best when targeted to the right audience, a good CPM rate would be one good enough to yield the best possible result for your budget. Since there are a variety of adverts platforms, it is important to monitor your ROI on each of the platforms you are using provided you target the best audience for your campaign.
Let us take Facebook Advertising for instance.
The best CPM for you should be determined when you target your audience rightly, and this can keep your CPM low enough to suit your purpose best. The Facebook audience manager helps you narrow down your target audience when you are setting up a campaign. You can target an audience based on certain demographics, activities, and interests.
A million-plus ads units and 114 billion impressions were studies by SalesForceSocial between January to March 2012 ( according to www.smallbusiness.chron.com).
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This study indicated that the average CPM for the highest performers in the study was between $1.39 to $0.78. The deal now becomes that to know the best CPM for your business, you have to clearly understand what works for your industry.
For example, if you are running a health and beauty ad and your CPM is well above $1.39, you are paying a little too much. If you are paying above $1 for a CPM in entertainment advertising, it is really expensive.
The key now becomes your clear understanding of the most recent standard for your industry.
How Do You Calculate CPM?
Calculating CPM is a little straight-forward.
CPM = Total cost of campaign / (total number of impressions / 1,000)
That is, if a banner ad generates 100 million impressions while costing $50,000, the CPM would be $0.5. Using this formula can help you a lot when you are trying to determine how to raise a budget and what number of impressions you are likely to get.
CPM has been criticized because of its tendency to not accurately account for the impressions your ad generates.
There is also a question of whether the ads are being charged fairly. What happens when there is a duplicate view from the same visitor? How about when an ad does not load properly? Would that be counted as well?
To mitigate against these, you must put in a good effort to target the right audience and also make sure that your banner ads (if you are using a banner ad) is just light enough to be loaded almost at an instance.
How Does CPM In Your Advertising Help Your Business?
It is very important to clearly understand the goal of your marketing campaign if you are to accurately measure success or failure using the metrics you would get at the end of the campaign.
If you are more concerned about exposing your brand to people without consideration to the number of clicks, then CPM is a good KPI (Key Performance Indicator) provided you target the right audience for your business.
This works best for the first kind of advert your brand needs (I’d rather call it a “publicity advert” where you just announce your brand and have a lot of people know about your brand).
The entertainment industry benefits well with CPM when they are promoting a show or an event where they just need their target audience to be aware of a forthcoming event only.
But then again, what is the goal of your advertising at the moment?
Do you think CPM is good enough for your business?