What is CPM in Digital Marketing?

January 26, 2023

CPM stands for "cost per thousand" and is a metric used to measure the cost of displaying an advertisement online. It is calculated by dividing the total cost of the ad campaign by the number of impressions (views) generated and then multiplying by 1,000.

Importance of understanding CPM in digital advertising:

It's critical for digital advertisers to comprehend CPM, as it empowers them to contrast the efficiency and efficacy of different advertisement efforts and platforms. Furthermore, CPM can be used in setting advertising budgets while determining the value of distinct ad placements.

How CPM works

The formula for CPM is: (Total cost of ad campaign / Number of impressions) x 1,000. For example, if an ad campaign costs $1,000 and generates 100,000 impressions, the CPM would be $10.

Factors that affect CPM rates:

Numerous aspects can affect CPM rates - from the kind of ad to its placement and platform, or even tailored targeting for a certain demographic. For instance, video ads will generally have a higher CPM than banners do; moreover, an advertisement on a reputable website is likely to generate superior returns compared with one hosted on another less prominent site. Additionally, honing in on age ranges or locality may also modify your expected CPM rate.

digital billboards in city


CPM operates on the principle of payment for every one thousand times an ad is displayed, while CPA/CPC models necessitate payment solely upon user engagement, such as clicking on the ad or executing a desired conversion. 

CPM can prove beneficial for establishing brand recognition, but CPA/CPC models typically offer more cost-effective solutions for stimulating specific actions and conversions. Ultimately, the selection between CPM and CPA/CPC hinges on the advertiser's objectives, budget, and target demographic.

Advantages and Disadvantages of CPM

Pros of using the CPM model:

  • CPM allows advertisers to effectively measure the cost of their ad campaign and the value of different ad placements.
  • CPM can be useful for advertisers with a limited budget, as it allows them to control the cost of their ad campaign by setting a specific budget for the number of impressions.
  • CPM also enables advertisers to calculate their return on investment (ROI) by comparing the cost of the campaign to the number of conversions generated.

Cons of using the CPM model:

  • CPM only measures the cost of ad impressions, not the effectiveness of the ad in terms of engagement or conversion.
  • CPM may not be the best option for advertisers with a limited budget, as it can be expensive to generate a large number of impressions.
  • CPM can also be less effective for advertisers with a specific conversion goal, as it does not measure the number of conversions generated by the ad campaign.
facebook ads on laptop at desk

Best practices for CPM advertising

Targeting the right audience: To achieve the best results with CPM advertising, it is important to target the right audience. This can be done by segmenting the audience based on demographics, interests, and behaviours.

Optimising ad creative: To improve the performance of CPM advertising, it is important to optimise the ad creative. This can be done by testing different ad formats, headlines, images, and call-to-action (CTA) buttons.

Testing and analysing performance: To continually improve the performance of CPM advertising, it is important to test different ad campaigns and analyze the results. This can be done by using analytics tools to track the number of impressions, clicks, and conversions generated by the ad campaign, as well as the cost per conversion.

How to maximize CPM ROI

To effectively maximize return on investment (ROI) for cost per thousand impressions (CPM), a strategic and tactical approach to digital advertising is required. Advertisers must prioritize the relevance and quality of their ad content to capture the audience's attention and boost engagement. 

Further, utilizing ad targeting options and bidding on placements with higher engagement rates can drive better ROI. Analyzing ad campaign performance and adjusting strategies accordingly is also crucial in optimizing ROI. Additionally, regularly assessing the market and adjusting pricing and bidding strategies can enable businesses to achieve higher ROI with CPM advertising. Adhering to these industry best practices can help advertisers maximize CPM ROI and attain their marketing goals.

Useful tools to track CPMs across platforms

Facebook Advertising - Revealbot has comprehensive reporting to track and analyse CPMs across the Facebook and Instagram platforms. 

Google Ads - Wordstreams Google Ads industry benchmarks provide an average of CPMs across various industries and locations to see how your ads stack up for efficiency.

Final Thoughts

Understanding CPM is crucial for digital advertisers as it allows them to effectively measure the cost and performance of their ad campaigns. By understanding CPM, advertisers can make informed decisions on ad placements, targeting, and budgeting, which can lead to better ROI and ultimately more successful ad campaigns. 

At Soone Agency, we understand the importance of CPM and can help clients make the most of their marketing budget. Our Google Ads services are designed to maximize ROI and ensure that client campaigns are effective in generating conversions, get in touch with our experts today.