Contents
- What is CPM?
- How to calculate CPM?
- Why track CPM?
- Features of payment under the CPM model
- When to use the impression payment model
What is CPM?
CPM, which stands for "cost per mille," represents a financial metric that indicates how much it costs to place an advertisement, including banners, for every thousand impressions. This term is widely used in internet marketing and advertising campaigns, allowing advertisers to evaluate their costs for reaching an audience.
How to calculate CPM?
The formula for calculating CPM is quite simple:
CPM = Cost of placement / Number of views × 1,000
For example, if the cost of a banner on a website is 20,000 rubles per month, and the average number of users visiting the site is 40,000, then CPM will be calculated as follows:
20,000 ÷ 40,000 × 1,000 = 500 rubles.
When launching an advertising campaign with payment for 1,000 impressions in context or targeted advertising, the advertiser specifies a fixed CPM value they are willing to pay, considering the minimum rates for the chosen format. The system then optimizes the frequency of impressions through an auction: the higher the bid, the more often the advertisement will be displayed to users.
Why track CPM?
Tracking CPM is an important tool for analyzing the effectiveness of advertising campaigns in terms of audience reach. This metric is often used in media planning and allows for comparisons across different advertising platforms. For instance, by placing the same ad on several websites, CPM helps determine which platform offers the most cost-effective advertising.
It is important to note that if a chosen platform sees an increase in traffic, this leads to a decrease in CPM, and vice versa. Thus, one can monitor the effectiveness of a particular site and adjust the advertising strategy as needed. To gain a more complete understanding of the results of an advertising campaign, CPM is typically analyzed alongside CTR (click-through rate), which reflects the number of clicks on the ad.
If CPM decreases but CTR also falls, this may indicate ineffective impressions. In such cases, it may be worth considering a change of platform or altering the ad itself. When placing ads in ad networks, it is also essential to check the campaign parameters and target audience settings.
Features of payment under the CPM model
The CPM payment model originated in internet marketing from traditional media, such as television and print advertising, which are aimed at mass audiences. It is important to understand that in this model, the cost of advertising is calculated not by individual impressions but per thousand impressions.
- All impressions of the advertisement are counted.
- No payment is made for clicks and redirects.
- Advertisements are targeted to a specific audience by selecting the appropriate internet resource.
- The budget for the advertising campaign depends on the platform's traffic: the larger the audience, the more impressions and the faster the funds are spent.
For those placing ads under the CPM model, it is crucial to monitor click-through rates (CTR). Ads must engage the audience and motivate them to visit the site. However, if the primary goal of the advertising is brand awareness, then click-through rates may be less critical.
To increase CTR, it is recommended to actively work on creative elements: improving text, changing graphics, experimenting with color schemes, and testing different calls to action.
When to use the impression payment model
Advertising under the CPM model usually requires significant investments to achieve the desired results, as its effectiveness directly depends on the frequency of impressions and reach. Therefore, this scheme is more commonly used by large companies to:
- Increase brand awareness.
- Communicate product information to a wide audience.
- Inform customers about special promotions, discounts, or loyalty programs.
Additionally, the CPM model is popular when launching new products. Before starting an advertising campaign, it is important to define its goals and select a payment model in accordance with those goals. Choose CPM if your task is to reach as many users as possible and focus on brand awareness. If, however, the priority is on clicks or targeted actions, it is advisable to consider other payment models, such as pay-per-click or conversion-based payment.