The foundation of successful advertising lies in measuring your performance. It will help you make sure that you understand which tactics work, what needs tweaking, and what must be got rid of. To measure the results effectively, business owners and marketers need to understand metrics. Cost per thousand impressions (CPM) is one of them.
In this post, you will find out what is CPM, how to measure it, and how different it is from other metrics.
Let’s begin with the CPM meaning. It is the price an advertiser pays for one thousand impressions or ad views. The term CPM stands for Cost per mille (thousand in Latin).
What is a good CPM?
To better understand their ad campaign’s CPM, digital marketing specialists are trying to find that universal benchmark. However, that is not an easy task. You can evaluate how effective CPM is only if you look at it in the context. This means you also need to consider the history of your ad performance, your market benchmark, and how Cost per mille contributes to your ROAS.
Traditionally, many marketers chase low CPM even though it doesn’t always translate into great ad performance. Low Cost per thousand impressions may indicate that the targeted audience is simply irrelevant. As a result, the impressions result neither in brand awareness nor in conversions.
Having said that, some reports attempted to find the median CPM on different advertising platforms. According to HubSpot, in 2019 the average CPM for Facebook News Feed ads amounted to $8.87. For Instagram, it was $6.8 for ads in Feed and $7.99 in Stories.
As for Google Ads, the median CPM was $28.80 for Google Search Ads, $2.81 for Google Display Network Ads, and $9.61 for YouTube Ads.
To calculate the Cost per 1000 impressions, you need the following information:
- Ad spend.
- The number of impressions.
When you have this data, use the CPM equation: CPM = (Ad spend / Number of Impressions) x 1000.
Here is the example of how CPM measurement: if you have spent $500 on your ad campaign and received 100 000 impressions, then:
CPM = ($500/ 100 000) x 1000;
CPM = $5.
CPM vs CPA
Now let’s take a look at some metrics that are similar to CPM, but shouldn't be confused with it. Let’s start with Cost Per Action (CPA). This metric is used to determine how much it costs for a business to get a paying customer. To calculate it, marketers use the following formula:
CPA = Total ad spend / CPA.
For example, you’ve spent $1000 on a marketing campaign, and it brought you 100 customers. In this case, your CPA is:
CPA = $1000/100;
CPA = $10.
Why do people oppose CPM vs CPA? Both of these metrics are used to determine costs. However, the Cost per thousand impressions measures the marketing success — how well the ad works. Cost per acquisition, on the other hand, is more of a financial metric as it assesses how the marketing campaign affects business revenue.
CPC vs CPM
Another metric somehow similar to CPM is Cost per click (CPC). It calculates how much a business pays each time a person clicks on the ad. To calculate this metric, use this formula:
CPC = Total ad spend / Number of clicks.
For example, your ad spend within a campaign is $600, and the campaign brought you 75 clicks. In this case, your CPC is:
CPC = $600/75;
CPC = $8.
What is the difference between CPC vs CPM? Cost per mile is great for tracking the results of your awareness ads. It helps measure how much it costs you to promote the visibility of your brand. However, if conversions are the objective of your campaign, then you should focus on Cost per click. It will explain how much you spend for each visit to your website.
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