What is Cost per thousand (CPM)?
Cost per thousand (CPM) is a digital advertising term that refers to the cost an advertiser pays per one thousand impressions of their ad. In simple terms, it means the amount of money spent on displaying an ad for 1000 times, regardless of clicks or conversions. CPM helps advertisers in determining the effectiveness and efficiency of their ad campaigns.
The use of CPM as a metric has been prevalent in the online advertising industry since its inception. It allows marketers to compare different forms of media and evaluate which medium provides better value for their investment by analyzing how much it costs to reach a specific audience segment.
One advantage of using CPM over other metrics like CPC (cost-per-click) or CPA (cost-per-action) is that it focuses on creating brand awareness rather than just driving traffic or generating leads. Advertisers can leverage this metric to assess how well their ads are performing at reaching their target audience even if those viewers do not interact with them directly.
The Advantages of Using CPM
The first advantage is its simplicity. Since advertisers pay only for impressions, there's no need to worry about measuring clicks or conversion rates. This simplicity makes it easy for brands with limited resources to get into online advertising without needing advanced data analysis skills.
A second benefit comes from its ability to provide insights into customer behavior by tracking impressions across devices and platforms. By understanding these patterns, companies can fine-tune targeting efforts more effectively and maximize exposure while minimizing waste spend.
Lastly, many publishers prefer selling inventory using CPM because they aren't responsible for guaranteeing results beyond serving an ad impression. Publishers don't have the responsibility for delivering clicks or actions; instead, they focus solely on delivering views - making this a low-risk option for them.
CPM vs. Other Metrics
While CPM is an excellent metric to measure brand awareness, other metrics may be more appropriate when measuring performance or driving actions. For instance, if your campaign goal is to increase website traffic or generate leads, CPC might be a better metric for you as it measures the cost of each click on your ad.
If you're looking to track conversions and sales directly from ads placed online, CPA would be the most suitable metric. This model allows advertisers to pay only when specific actions are taken by users such as making a purchase, filling out a form, etc.
Overall understanding which metrics align with your goals can help ensure that you make the most of your digital advertising budget.