What is CPM and How Does It Work

What is CPM
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Curiously every advertiser supposes to know the meaning of CPM. What is CPM and how does it work or used in the advertising industry is unclear for many advertisers even to the ones you may think know much about advertising.

The definition of CPM is pretty straight-forward and easy to understand. But it all depends on who is explaining what CPM means. It is not just enough to just know what CPM stands for but also it is important to understand how you can use it to your advantage.

In this post, we are going to explain and teach you all you need to know about CPM, CPM Ads, CPM formula and how you can use CPM advertising campaigns to grow your business.

So let’s get started…

What is CPM (Cost per mille)

CPM is also known as cost per mille is simple ad advertising measurement or metric used by advertising companies to bill advertisers per 1,000 impressions or views.

In a broader sense, Advertisers are charged a specific amount for every 1,000 impressions or views for their ads. This is different from cost per click (CPC) where advertisers are charged per each click.

In the case of CPM, advertisers pay per 1,000 impressions or views.

Example of CPM

An advertiser who creates and launch CPM ads is charge $2 for every 1,000 impressions or views. This means that, if the advertiser gets 10,000 impressions or views during their CPM advertising campaign, they will be charged $20.

Here is how that is calculated

Example of CPM

How to calculate CPM

With the above example, Let’s look at how to calculate CPM and how you can apply this calculation in your advertising campaign.

Using the above CPM example, you get a basic understanding of how CPM is calculated. But in the real-life situation. An advertiser’s goal is to understand the total cost of a CPM campaign or how much approximately will his or her campaign cost.

As a breakdown, the way the advertiser is supported to calculate CPM is shown in the image below.

How to calculate CPM

Here is how CPM campaign cost is calculated. Assuming your goal is to buy 500,000 impressions or views and you are not sure how much all that will cost, you can figure out that using the above image by taking the total cost of $2,500 and dividing it by the 500,000 and multiplying it by 1,000 to arrive at a CPM of $5. ($2,500 / 500,000 * 1,000 = $5).

This means you will need to pay $5 per every 1,000 impressions or views you get making your total campaign cost of $2,500.

What is CPM Ads

CPM Ads are types of ads which are billed per 1,000 impressions or views. Thus, the advertiser is billed using a CPM pricing model per every 1,000 impressions or views during their CPM ad campaign.

This means that the advertisers are not billed based on the number of clicks or leads but only for the impressions and views, they get during their CPM ad campaign.

The advertisers are billed a certain amount each time they receive 1,000 impressions or views by the ad network.

CPM Formula

So here is the CPM formula used to calculate CPM. You take your total advertising cost and multiply it by 1,000 then divide it by the total number of impressions or views you want to buy.

CPM Formula

Using the same figure above, we have a total advertising cost of $2,500 and a number of impressions is 500,000. Here is how you calculate it using 1,000 as the CPM formula base figure. ($2,500 * 1,000 / 500,000 = $5) in our case.

Average CPM

Average CPM is simply a comparison of CPM cost in various countries or periods in order to understand the approximate cost of CPM in a particular region or period.

This helps advertisers make better decisions when planning their CPM campaigns. It helps advertisers to set their CPM Ad campaigns budget in ways it’s more effective when buying impressions or views.

AdsTargets as the Best CPM Ad Network

AdsTagets provides a great platform for you to run your CPM campaigns in order to grow your business faster and better with minimum advertising budgets as compared to other ad networks.

Our Ad technology optimises your CPM campaigns to reach only the right people while saving you a lot of money. With AdsTargets CPM ad campaigns, you will be able to reach a large number of people with very low cost but effective advertising campaigns.

If you have not tried AdsTargets CPM Ads, you are welcome to join our happy family of advertisers and start launching effective CPM ad campaigns to grow your business.

Conclusions

CPM plays a very important role in online advertising which is why it’s important to understand all about CPM. Having a clear knowledge of CPM advertising, you will be able to create more profitable ad campaigns that will have high advertising ROI.

Let us know your experience with CPM ad campaigns in the comment section so that the community will learn from you. If you have questions concerning CPM advertising, please drop it in the comment section and we will get back at you ASAP.

Eugene Agoh

Eugene Agoh

Co-founder at AdsTargets | Online advertising expert | Search engine optimisation expert | Social media marketing expert.Eugene is a Passionate writer on relating to online advertising, branding and generally interested in creating digital marketing content. He is curious about the future of digital advertising.Follow Eugene on LinkedIn @ eugeneagoh

One Response

  1. First of all, this is the best article I have ever come across explaining CPM and how it works in simple layman understanding. I like the fact that you took some time to explain with graphics more vivid and in a simple and a clear manner.

    Take some time and explain CPA also in the manner I will be back to read and share your post again.

    Cheers!

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