What is CPM?

As the global number of internet users surpasses 5 billion, it is no surprise that digital marketing is increasing in popularity.

With over 5 billion people using the internet and 50% of them spending online, digital marketing provides more and more opportunities for business to grow.

For marketers and publishers who use digital marketing, it is essential to understand the impact and performance of their campaigns, how to create campaigns that increase brand awareness and achieve the best possible return on ad spend (ROAS).

One of the most popular pricing methods and metrics used in digital marketing is CPM (cost per Mille). It is a formula used to calculate the total ad spend per one thousand impressions for an ad. An impression is every time an ad is successfully displayed to and viewed by an internet user.

In this article we explore how this metric can be used to optimise display campaigns and why it is so popular.

Fluid Ads - What is a CPM

How to calculate CPM

Divide the ad spend by the number of impressions and times by one thousand (Ad spend/impressions x 1000).

An advertiser then pays the owner of a website a cost per thousand impressions. It is worth noting that with the rise of programmatic advertising and supply side platforms (SSP), advertisers now have the ability to buy impressions by the thousand spread across multiple websites. For example, a sporting goods store can buy a thousand impressions spread across multiple sporting goods blogs and websites.

CPM has been one of the most popular pricing models for determining advertising costs since the inception of digital marketing.

As campaign analysts and digital marketers now have lots of data and metrics to measure engagement, total impressions, ad effectiveness and many other metrics, CPM still offers many benefits for marketers to track the impressions of their ad inventory.

Marketers with the primary focus of measuring brand awareness and engagement, CPM marketing is the most common method of raising brand profiles. It’s not just a way of seeing how many times their ad is successfully displayed but it is a way of measuring how many views their ad is getting on any given website.

CPM marketing is a good way for companies who are new to the market to increase brand awareness by displaying ads across multiple websites and devices.

What is a good CPM?

As with most pricing models and metrics used in digital marketing, you cannot and should not define and determine efficient ad spend using a single metric. You must take into consideration previous campaigns, calculate the impact of CPM on ROAS and benchmark results against market averages. If you combine all of this, you can calculate if CPM impressions are a good pricing model for your marketing efforts

A relatively low CPM isn’t always the best indication of ad spend value. It could just be that you are receiving low quality traffic, or even worse, bot traffic! It is important to remember that when it comes to traffic, quality is always more important than quantity.

Having a low CPM doesn’t always correlate with good value, just as having a high CPM doesn’t always mean you are receiving high quality traffic that has a higher chance of conversion. For publishers, having a high CPM doesn’t always result in more revenue because some ad inventory may get left unsold; it is a fine balancing act for both advertisers and publishers.

How to optimise a CPM campaign

Choosing an Ad Network

There are a wide range of ad networks available, the main one being Google Ads.

For companies who have little to no experience running display campaigns, getting started can be a minefield of confusion, so it is important to understand what influences the cost of a thousand impressions.

Each publisher must decide which factors will determine what their CPM rate is and how to keep the cost reasonable enough to make it commercially viable whilst minimising unsold ad inventory.

Prepare for volatility

It is important to know when to expect seasonal changes in cost so you can benchmark your performance and forecast future revenue more accurately.

For example, if you have a costume website, then expect increased CPM prices as we approach Halloween. Knowing when to expect these price increases is essential for businesses as it allows for them to plan their advertising budgets to be more competitive when necessary and manage cash flow more accurately.

Use a supply side platform

For publishers to be able to generate more income for ad inventory, it is recommended that a supply side platform (SSP) is used so you can offer your ad inventory to more advertisers.

Experimenting and testing ad placements is also a good way to optimise ad placement and performmance, however, it is advisable to do this when ad space rates are at their cheapest. Avoid doing any testing and performance in the last month of every quarter and around public holidays and Christmas.

Maximise ROI

Almost all social media platforms and search engines offer CPM advertising services, but it is important to choose the right one for your business and optimise your strategy effectively.

Target the right audience

Refined targeting and segmentation will ensure you’re only spending money on showing your ads to relevant audiences.

Monitor the frequency levels

Make sure your ads don’t repeatedly display to the same people.

Use attention grabbing ad imagery and copy

You want your ads to be visually stimulating enough so that people remember your brand.

Include social proof

Include social proof to show customers that you are a reputable business with many happy customers.

Benefits of CPM advertising

It is often less expensive than CPA or CPC advertising, however, the price that you pay will depend on where you are displaying your ads. If you want your CPM campaigns to be displayed to a larger group of customers, you may need to bid more for your ad placements.

Social media sites like Instagram allow you to narrow down your audience with extensive targeting options.

Increase brand awareness

Businesses need to establish themselves in their target market and create a good reputation and strong brand awareness before their audience will take them seriously.

Display relevant ad copies to the relevant audience

Due to the many targeting options, it is possible to target only the most relevant audience. CPM strategies can lead thousands of potential customers to a company’s website.

Create industry hype

If the content on display advertisements attached to a CPM campaign is high quality, people will start talking about your brand. The best campaigns generate vast amounts of buzz, which lead to increased traffic and conversions.

The downside of CPM

Criticisms often stem from the challenges of accurately counting impressions. Some advertisers question if they are being charged fairly and if the traffic they are receiving is genuine. Problems can include duplicate views from the same visitor and bots visiting sites and skewing the total number of views. Advertising fraud can happen when site owners use bots to send traffic to a website with the intention of increasing views.

Conclusion

As with most digital marketing strategies, they require constant monitoring and testing to ensure optimal performance is achieved.

Finally, don’t use CPM strategies in isolation, the best results come when digital channels are aligned with CRM strategies which work on bringing your new leads down the funnel and converting them to new customers/clients.

At Fluid Ads, we have a vast knowledge of the industry and an all-in-one display advertising platform. Find out more about our fully-managed display advertising service and how our platform works.

Flexible solutions to suit your business