What is CPM?

Global programmatic advertising spending has doubled in the past four years and is expected to grow by more than more than $40 billion by 2023.¹ As the online advertising industry continues to expand (programmatic advertising now accounts for more than 89% of all digital display ad spending), it’s important to understand some of the key terms that make digital advertising tick.² Let’s dig into CPM, or cost per mille, which is one of the popular pricing models used in programmatic advertising.

CPM is one of many types of possible pricing models in digital advertising. Because digital advertising can be measured with different marketing metrics – how often an ad appears, is clicked, leads to a sale and more – pricing can be tailored to the intended function of the ad. Certain pricing methods may be more appropriate for specific advertising campaigns. CPM is often used for advertisers focusing on brand awareness or delivering a specific message, because this pricing model is more focused on exposure as opposed to a cost-per-click model.

CPM is only one of a variety of digital advertising pricing models. While CPM is cost per thousand impressions, another type of pricing is cost per click (CPC), which is where advertisers pay each time consumers click an ad. CPA, as opposed to CPM, is cost per acquisition, where the advertiser only pays when consumers make a purchase after clicking on an ad.

Display ad costs vary, but what makes them one of the most cost-effective advertising methods is the flexibility. With some traditional advertising, brands can’t change the visuals, call to action (CTA) or message after an ad begins running. That means that if the ad isn’t effective, the cost per action may be higher. Since display advertising is dynamic, and based on pricing models like CPM, this allows advertisers to change course during a campaign and gives brands greater flexibility to optimise campaigns and maximise the efficiency of their budget.

Amazon’s Sponsored Display uses a cost per thousand viewable impressions (vCPM) pricing structure. This means an advertiser is charged when their ad has been viewed by shoppers. Sponsored Display adheres to the MRC definition for an ad view: at least 50% of the ad should have been in the shopper’s view port for at least one second for it to be registered as a viewed impression.

Amazon’s audio ads are sold on a CPM basis. These audio ads campaigns are measured through impressions, average impression frequency, cumulative campaign reach, audio start, audio complete, effective cost per audio complete (eCPAC) and more. Amazon DSP’s display ads also use a CPM model.