April 21, 2023
April 21, 2023

The Full Guide to CPM Advertising (2023)

Do you ever feel like you're spending a lot of money on advertising without really knowing if it's paying off? CPM (cost-per-thousand impressions) to the rescue!

CPM is a popular pricing model in online advertising that can help businesses maximize their return on investment. In this guide, we're going to take a deep dive into all things CPM advertising. By the end, you'll have a solid understanding of CPM advertising and how it can help solve one of the biggest challenges in advertising: measuring the performance of your ads.

What Is CPM Marketing?

CPM advertising is a pricing model used in online advertising to measure the cost of reaching a thousand people with an ad — CPM stands for "cost per thousand impressions” (an impression is each time an ad is viewed by a user).

Often used for display ads, video ads, and social media ads, CPM advertising enables businesses to be more precise in measuring the reach and effectiveness of their ads, as they are only paying for actual views or impressions. Utilizing this cost model, businesses can have greater control over their advertising spend and can make more informed decisions about where to allocate their resources.

CPM advertising helps businesses generate revenue by enabling them to reach a larger audience and increase brand awareness. By paying for each impression, businesses can increase their chances of engaging potential customers and driving traffic to their website or product. CPM also provides businesses with valuable data on ad performance, which they can use to optimize their ad strategy and increase conversions. 

Programmatic ad buying — purchasing ad inventory in real-time through an ad platform like Snapchat, based on a set of criteria such as audience demographics, location, and behavior — is a primary way CPM is used in digital advertising. Programmatic ad buying lets advertisers target their ads to specific audiences and adjust their bids in real-time to ensure they are getting the most value for their money.

Ad placements also play an important role in CPM marketing. Advertisers can choose where their ads are placed, such as on a particular website or social media platform. The more desirable the placement, the higher the CPM.

The CPM model is used for different types of ads, including display ads, video ads, and social media ads:

  • For display ads, CPM is used to measure the cost of showing an ad on a website or mobile app.

  • For video ads, CPM is used to measure the cost of showing an ad before, during, or after a video.

  • For social media ads, CPM is used to measure the cost of showing an ad on a platform like Snapchat.

With CPM, businesses only pay for actual views or impressions, which can help them to be more cost-effective with their advertising spend. By carefully selecting ad placements and monitoring the number of impressions, they can optimize their CPM and make sure they’re getting the most out of their advertising budget.

To paint a clearer picture, take this example: Imagine a company that sells fitness equipment wants to promote a new product on a website that receives 100,000 visitors per month. The company decides to use a CPM model to purchase advertising space on the website. They agree to pay $5 for every thousand impressions of their ad. If the ad is viewed by every visitor to the website in a given month, the company would pay a total of $500 for the ad placement. However, if the ad is only viewed by half of the visitors, the company would only pay $250.

Impressions vs Page Views, CPM vs CPI

CPM is often used interchangeably with the term "impressions" in the digital advertising world. To better understand all things CPM, let’s take a step back for a moment and look at impressions vs. page views, as well as the difference between CPM and CPI (cost-per-install).

Impressions and page views are both metrics used in measuring ad performance, but they represent slightly different things. An impression refers to the number of times an ad is displayed on a web page or social media platform, regardless of whether or not it is actually viewed by a user. In contrast, a page view refers to the number of times a web page or social media post is viewed by a user, regardless of how many ads are displayed on that page.

For example, let's say a website displays an ad on its homepage. If that ad is displayed 100 times, that would be counted as 100 impressions, even if only a few people actually view the ad. On the other hand, if the website's homepage is viewed 1,000 times, that would be counted as 1,000 page views, even if the ad is only displayed on a small portion of those views.

When measuring ad performance, impressions and page views are both important metrics to consider. Impressions are useful for understanding how many times an ad is being displayed to potential customers, while page views can help businesses understand how much overall traffic their website or social media page is receiving.

And then there’s CPM vs. CPI. CPI is a pricing model used in mobile app advertising that measures the cost of acquiring a new user who installs an app after clicking on an ad. This model is different from CPM in that it focuses on the specific action of app installation rather than the cost of showing an ad to a thousand users.

CPI is most appropriate for mobile app developers who want to increase the number of downloads and installations of their app. This pricing model is particularly useful for new apps that are looking to build a user base quickly. CPM, on the other hand, is most appropriate for businesses looking to increase brand awareness or promote a particular product or service.

For example, a clothing retailer might use CPM to show ads to users who are interested in fashion and lifestyle topics. By using CPM, the retailer can increase the number of impressions and views for their ad, which can lead to increased brand recognition and potentially more sales over time.

Ultimately, businesses should focus on a combination of both impressions and page views, as well as other metrics like click-through rates (CTR) and conversion rates, to get a more complete picture of their ad performance and optimize their advertising campaigns for maximum ROI.

How CPM Advertising Works

As mentioned earlier, CPM marketing works by measuring the cost of reaching a thousand people with an ad. The CPM formula is simple: CPM = (total cost / total impressions) x 1000. So, for example, if a business pays $500 for 100,000 ad impressions, the CPM would be $5.

Many other factors and nuances can affect CPM performance, including ad creative, targeting, and placement options. Here’s how implementation takes place:

  1. A business decides to run an advertising campaign and chooses to use the CPM cost model.

  2. The business creates an ad, such as a banner or video, and selects the ad format and placement options.

  3. The ad is then submitted to a publisher or advertising platform for display.

  4. The publisher or platform charges the business a fee for every thousand impressions (CPM) that the ad generates.

  5. The ad is displayed to users on the publisher's website or platform.

  6. The number of impressions is tracked and reported to the business.

  7. The business then analyzes the CPM metrics to determine the performance of the ad and adjust their ad targeting and placement strategies accordingly.

icons of a charts and graphs

Why CPM Is Important in Advertising

CPM helps businesses optimize their ad spend by providing a clear picture of the cost of reaching their desired audience. With this information, businesses can determine which ad placements provide the best return on investment (ROI) and adjust their budget accordingly.

For example, if a business sees that their ads are getting more impressions on a particular website or social media platform, they can allocate more of their budget to that placement and less to less effective placements. By optimizing their ad spend in this way, businesses can get the most out of their advertising budget and maximize their ROI.

Maximizing CPM ROI requires business to focus on targeting and ad placements. This means carefully choosing the platforms and websites where ads will appear and selecting targeting options that will reach the right audience. Additionally, businesses should optimize their ad creative to make sure that it’s compelling enough to grab a viewer's attention.

The value of cost-per-impression is that it helps businesses measure the effectiveness of their ads by tracking the number of times the ad is viewed by a user. This metric allows businesses to optimize their ad campaigns by adjusting the ad's content, placement, or targeting. By tracking the number of impressions, businesses can determine which ads are resonating with their target audience and adjust their strategy accordingly.

Calculating and Assessing CPM

Calculating CPM for an ad campaign is actually pretty simple. First, you need to determine the total cost of the ad campaign. This includes everything from the creative production costs to the media spend. Once you have that total cost, you need to determine the total number of impressions the ad received. This is where things can get a bit tricky, depending on the ad format and the way the campaign was executed.

Let's take a display ad as an example. Say you ran a display ad campaign that cost $10,000 and received 500,000 impressions. To calculate the CPM, you would divide the total cost of the campaign ($10,000) by the number of impressions (500,000), and then multiply that number by 1,000. So in this case, the CPM would be $20.

When it comes to what constitutes a "good" CPM, it really depends on the industry, the ad format, and the specific campaign goals. For example, a CPM of $20 might be considered good for a display ad campaign, while a CPM of $50 might be considered good for a video ad campaign. Industry benchmarks can be a helpful starting point for determining what a good CPM might be in your specific context, but ultimately you'll need to consider the unique factors that impact your ad campaign.

Man looking at graphs on paper and iMac.

Benefits of CPM Advertising

CPM advertising is unique in that it’s one of the most effective ways for businesses to utilize their advertising budget. To review and expand on the benefits, CPM offers:

  • Increased brand awareness: With CPM advertising, businesses can reach a large audience and increase brand awareness by placing ads in front of potential customers.

  • Cost-effectiveness: Businesses only pay for the number of impressions their ad receives, making it easier to manage advertising budgets.

  • Measurable results: CPM advertising provides businesses with valuable metrics through the number of impressions and clicks their ads receive, enabling them to inform and adjust their advertising strategies accordingly.

  • Targeted advertising: By affording businesses the opportunity to target specific demographics and interests, the CPM approach ensures that their ads are seen by the right people.

  • Flexibility: Businesses can adjust their ads or targeting at any time, allowing them to optimize their ad campaigns for better results.

  • Wider reach: Because CPM advertising can reach a large number of potential customers, it’s ideal for brands that want to expand their customer base.

CPM Strategies

With those benefits in mind, to get the most out of CPM advertising businesses need to focus on two key areas: targeting and optimization. Targeting involves identifying the audience that is most likely to engage with your ads, and then tailoring your ads to reach that audience through a variety of tactics, including demographic targeting, behavioral targeting, and contextual targeting. By reaching the right audience, businesses can increase the likelihood of their ads being clicked and improve their CPM performance.

Optimization involves tweaking your ads to improve their performance over time. This can be done through a process of trial and error, where you experiment with different ad creatives, placements, and targeting strategies to see what works best. By constantly monitoring and analyzing your CPM metrics, you can identify areas for improvement and refine your strategy to achieve better results.

Another important factor in maximizing CPM ROI is ad placement. The location and format of your ads can have a big impact on their performance. For example, ads placed near the top of a webpage tend to get more visibility than those placed further down. Similarly, video ads tend to perform better than static display ads, as they are more engaging and have a higher click-through rate.

Finally, consistently tracking and analyzing CPM metrics is critical to improving performance. Regularly monitoring metrics like click-through rate, cost per click, and conversion rate can help identify areas for improvement, helping to ensure that your CPM advertising is delivering the best possible results for your business.

CPM Advertising on Snapchat

Snapchat offers businesses the ability to reach a younger demographic through CPM advertising by providing:

One way Snapchat helps businesses with their CPM advertising plans and goals is through its ad auction system. This system allows businesses to bid for ad placements based on their CPM rates and target audience. By bidding on ad placements, businesses can increase the visibility of their ads and optimize their CPM ROI.

Start boosting your ROI with CPM advertising on Snapchat today!