What is CPM?
CPM is one of the most significant advertising metrics. CPM means cost per mille, i.e. the cost per thousand impressions. Simply it means the cost of having an ad published, seen a thousand times on a particular website, and is used to inspect and oversee ad performance. Since early online marketing campaigns, CPM has acted as an industry standard that determines web ads’ advertising costs and pricing. CPM calculation is simple – take the total cost paid in CPM campaigns and then multiply the total impressions by the CPM rate and then divide it by one thousand. For example, one million impressions at 1 $ CPM equals $1000 in gross revenue.
Table of Contents
- How to calculate CPM?
- What is a good CPM?
- What are the top factors affecting CPM?
- Benefits of CPM:
- Why is CPM an excellent revenue indicator?
How to calculate CPM?
What is a good CPM?
What is a good CPM? Why aren’t low-cost CPMs the best? We don’t like the concept of ‘What is a good CPM?’ or ‘What is a bad CPM?’ since there isn’t one solid answer to these questions. What is a good CPM? It depends predominantly on two significant factors:
- What strategies and tactics are you using?
- Your actual campaign goals
As with most monetization metrics and pricing models, you cannot determine if a CPM is good or bad based only on a particular or single value. Scrutinizing past performance data, benchmarking outcomes against averages for your market, and assessing the impact of CPMs on your ROI can help you establish whether your CPM impressions are a good pricing model for your advertising undertakings. A lesser or lower CPM is not always a constructive indicator for an advertiser, as it may be a sign of poor-quality traffic. Likewise, for publishers, having a high CPM doesn’t automatically denote higher earnings, as some ad inventory may not be sold yet.
What are the top factors affecting CPM?
- Geographical Strata: An average CPM will be influenced by how developed the online industry is in each nation or state and the spending power of the inhabitants of that region or country
- Ultimate Data Usage: Targeted ads via available data to build a user profile will demand higher CPM campaign rates than merely purchasing the ad space without segregating the target audience
- Correct Device: Ads served on mobile phones or tablets sometimes or might have a lower CPM than on desktop because of the screen size limitations, lower CTR, and conversion rate
- Website Content Quality: Premium and niche publishers can have a higher CPM as they have accumulated a larger segmented and more homogeneous audience than a generic site
- Ad Size Matters: On average, larger ad formats have a higher CPM, as they are more noticeable and likely to persuade action from the user
- Ad Viewability is Essential: According to Google, IAB, and MRC, viewability means having at least fifty percent of the ad on the screen for a minimum one second. A publisher with a low viewability score will automatically witness a drop in their CPM rates
- Several Ad Units on Page: A higher number of ad units will drive down the CPM rates. A more significant supply will result in lower bids for those ad units
Benefits of CPM:
CPM endures as a vital metric for publishers! While analysts and strategists now have an abundance of data and metrics to measure user engagement and ad effectiveness, CPM remains the flag bearer.
- Favorably Profitable: CPM is profitable for publishers, as publishers receive revenue just for placing ads on their websites. It is easier than getting users to click on or engage with an ad, but usually, these results depend more on advertising itself than a publisher
- No Added Efforts: Simpler to monetize inventory with cost per thousand impressions model. CPM cost per mille is easy; however, the publisher’s ad inventory must reach a specific bar of daily user views to serve ads on the CPM ad platform. Every platform has distinct requirements concerning the absolute number of visits
- No Keyword Gathering: With CPM cost per mille ads, publishers don’t need to consider keyword selection for their website targeting. Programmatic advertising is created to personalize each impression for every viewer, so keywords are not required
- Easy Countable Performance: To calculate how much profit publishers can earn by placing cost per thousand impressions ads, they can use distinctive estimations – an average number of served impressions, daily-active-users count. Plus, these metrics can be merged with specific ad network metrics, such as eCPM
Why is CPM an excellent revenue indicator?
Display advertising is the leading revenue source for most websites. CPM is a crucial and critical metric to measure revenue for every 1000 impressions. Observing cost per thousand rates will help you evaluate ad inventory performance for every 1000 impressions, and you can take action to optimize the revenue sources. If you want to achieve that, it’s crucial to recognize what impacts upon CPM rates. Remember, each publisher will have to consider multiple factors to determine a reasonable CPM rate for their ads. Note that higher CPMs are a positive indicator, yet it needs to be compared with other data, like the fill rate of ad placement. AdSense reports this as RPM.
It eventually benefits the publishers because selling on a CPM model could easily monetize your content if your website has high traffic. If you want to understand the real difference between CPM and eCPM, check out our detailed piece on eCPM. Also, go ahead and browse through our CPM, CPC, CPA, and CTR guide to learn more about the other key advertiser and publisher metrics.
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