Learn About CPM: How CPM Works in Advertising

Cost per thousand, or ‘cost per mille’ (CPM), is a digital advertising cost metric that websites use to price on-site display ads that are paid for by advertisers. In a CPM ad campaign, the advertiser pays a website a fixed cost per thousand impressions—or views—that their ad placements receive. The ‘M’ in CPM stands for mille which is the roman numeral for one thousand (mille is also latin for 1,000). This is just one of the ways that websites earn ad revenue.

CPM doesn’t guarantee that users will engage with an ad, but CTR (or click-through rate) may be used as a success metric in a CPM campaign. The CPM model is often used for campaigns that are aimed at brand awareness. Some advertisers may even choose to target the ads in a CPM campaign to reach their desired demographic. Furthermore, certain high-traffic websites are able to charge higher CPMs than smaller sites, which may have lower CPMs.

CPM advertising works by tallying digital ad impressions, a marketing metric used to count the number of digital views of a piece of content. Impressions are also called ‘ad views’ and do not measure the number of clicks a display ad receives. A website charges the advertiser a specific price for every 1,000 ad views that appear on its site. For example, if a site charges $1.50 CPM, the advertisers pay a dollar and fifty cents for every 1,000 times their ad shows up on a website page.

Calculating the cost of a given CPM ad campaign is simple, which may be one of the reasons that these campaigns are common. You simply multiply your total number of impressions on-site by the CPM rate and then divide by 1,000. Here is an example way to calculate your ad spend on a CPM campaign.

1. 1. Find your CPM rate. Perhaps your CPM rate is $2.00, which is a common rate for sites.
2. 2. Multiply your CPM by the number of impressions. If over the course of the ad campaign, the website attracted 5,000 visitors, your ad will have made 5,000 impressions. Multiply this number by your CPM rate to get a value of 10,000.
3. 3. Divide by 1,000. The next step is to divide 10,000 by 1,000 to get your total digital ad fee. 10,000 divided by 1,000 is 10, which means that the total cost of this campaign would be $10.00.

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