CPM: Cost per mille
What is CPM?
CPM, or Cost Per Mille, is a pricing model for advertisers, referring to the amount advertisers pay to display 1,000 ad impressions. The “M” stands for ‘mille’ which is Latin for 1,000.
CPM in marketing and advertising
CPM pricing is ideal for brand advertising campaigns, or campaigns that have a goal to increase exposure and brand awareness. That's because, with CPM campaigns, advertisers are buying ad impressions, essentially looking to get more eyes on their ads.
This is in contrast to performance marketing campaigns and pricing models that require advertisers to pay only when users complete a specific action. For example, in a cost-per-completed-view pricing model, advertisers don’t pay until a video ad is watched in its entirety - so simply looking at the ad isn’t enough in that case. Similarly, cost-per-engagement advertising requires some kind of action beyond the initial impression, like taking a survey or playing a mini-game.
In fact, a CPM campaign is great for creating and elevating brand awareness in preparation for a more conversion-oriented campaign.
Because CPM campaigns are so brand oriented, and don't require the users to engage with the ad, it's difficult to measure its performance. Still, one common way to determine the efficiency of a CPM campaign is to look at CTR (click-through rate), which is the ratio of clicks an ad receives compared to overall impressions. That way, you can get a general understanding of how well the ad resonated with users.
eCPM vs CPM
CPM is a pricing model for advertisers, while eCPM is a revenue indicator for app developers.
While both measure the cost for 1,000 impressions, CPM exclusively represents how much an advertiser will spend on 1,000 ad impressions, and typically exists in the context of brand awareness campaigns that don’t have specific performance goals. The advertiser is looking for a specific amount of impressions, or eyeballs, which is what they pay for.
In contrast, eCPM, or effective CPM, measures the revenue an app generates from displaying 1,000 ad impressions to their users.
CPM formula: How to figure out CPM
Calculating CPM requires having some basic data on an app’s ad campaign - such as the total cost of the campaign, as well as the number of impressions it received. To measure CPM, you divide the total cost of the campaign by the number of impressions. The result is then multiplied by 1,000, generating the CPM figure, also known as the CPM rate.
CPM calculation example
For example, if the total cost to run a campaign is $300, and it receives 5000 impressions, the CPM for the ad would be $60.
($300 / 5000 impressions) * 1,000 = $60