What is CPM? Here’s everything you need to know about cost per mille
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.
What is cost per mille or CPM?
Programmatic advertising is the automated buying and selling of digital advertising inventory, including display and video formats. You can use a demand-side platform (DSP), which is software that automates purchasing and management of digital advertising inventory from multiple publishers. A supply-side platform or sell-side platform (SSP) is software used by publishers to automate the sale and management of their advertising inventory.
Certain types of programmatic ads are measured by cost per mille (CPM), which means cost per thousand impressions. CPM is a pricing model where you pay a certain amount for 1,000 impressions, or the number of times your ad appears. CPM is popular with larger publishers, where advertisers pay a set price based on the number of impressions each placement receives in a monthly or quarterly basis.
Why is CPM important?
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.
What is CPM vs. CPC vs. CPA?
As mentioned above, 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.
How is CPM cost calculated?
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 optimize campaigns and maximize 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 viewport for at least 1 second for it to be registered as a viewed impression.
What are some CPM examples?
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.
1 Statista, Global Programmatic Advertising Spending, 2021
2 eMarketer, Programmatic Digital Display Ad Spending Forecast, June 2021