As a marketer or business wanting to market your products, you’ve probably come across many different types of marketing and ways to charge you for your ads. For example, a common type of digital advertising involves buying pay-per-click (PPC) ads, like those on Google, Facebook, or Amazon. These are Cost Per Click (CPC) ads, i.e. you only pay for ads when somebody clicks on them.
However, there are alternatives to bidding for and buying CPC ads. Sometimes you don’t need people to click on your ads – the mere fact they view them is enough for you to meet your goals. In that case, CPM ads may be more appropriate. In this post, we examine CPM ads and the role of CPM in digital marketing.
What is CPM?
CPM stands for the somewhat unintuitive Cost Per Mille. However, once you understand that “mille” means 1,000 in Latin, it becomes more understandable. CPM represents the cost per 1000 impressions of your ad.
It is a good proxy for showing your marketing reach, as it effectively indicates to you how much it is costing you to reach 1,000 people with your ads.
It’s important to understand that impressions are not the same as page views (although both metrics are similar and can be traced through your analytics). Page views are the number of people who visit a particular webpage – in this case, the page where you will place your ad. Impressions, however, are limited to the number of times a visitor looks at a specific element of a page, for example, your ad. Each time a person loads a page, and reaches the place where your ad appears, it counts as one impression.
CPM vs CPC vs CPA
There are three common ad pricing models you could follow for your ads:
- CPM – Cost Per Mille (cost per thousand impressions) – we will examine this in detail in this article.
- CPC – Cost Per Click – advertisers pay each time somebody clicks on their ad.
- CPA – Cost Per Acquisitions – advertisers pay when somebody performs a specific action, e.g. signs up to your newsletter.
There are also some pricing models specific to particular types of ads, e.g. CPV – Cost Per View – advertisers pay whenever somebody watches a specific amount of their video ad. CPV ads are similar to CPM ones, in that you pay when these ads are served on a targeted audience.
CPA is the most targeted – you only pay if somebody meets a specific conversion goal. CPC ads require some activity by the user – they have to click on an ad. CPM (and CPV) ads are more passive – the user only has to see your ads for the advertising network to charge you – so it’s imperative you target the correct people with your ads.
CPA ads will generally have the highest price, reflecting the relative likelihood of success of your campaign. The cost of a CPC ad will generally be lower than CPA ads, but higher than CPM ads. In theory, CPM ads should cost the least, due to them having a lower chance of converting into a sale (although they should improve your brand awareness). Of course, as you will be bidding against your competition for most of your ad placements, the price you eventually face will depend on multiple factors, not just the ad pricing model you choose.
Why Use CPM in Digital Marketing?
CPM is a particularly good measurement of brand awareness. It is well suited to top-of-the-funnel campaigns. Your aim will typically be to broadcast your name to a vast (yet still targeted) audience. In these campaigns, most people may look at your ads, but few are likely to click on them. Indeed, you might not even include a link in your brand awareness ads.
For example, you may be launching a new product to the market and use your ads to let people know of its existence and benefits to them. The main reason to pay for impressions (as you do with CPM) is to increase the visibility of your product or brand to a wide (yet still appropriate) audience.
You don’t have to be a new brand to use CPM brand awareness ads, however. You might even be the market leader in your niche, but still need to advertise to keep your product in the minds of potential customers.
Another advantage of CPM is that it can result in a much more predictable total advertising cost than other methods. You go into your campaign knowing precisely what you will have to pay for 1,000 impressions and can often limit the number of times your ad is served to match an agreed number of impressions. This makes it much easier if you have a strict advertising budget.
It also makes bidding easier. You don’t have to worry about so extensive keyword research or other complicated bidding strategies as you would with PPC advertising.
Problems of Using CPM in Digital Marketing
CPM isn’t suitable in every situation, of course. The advertising market charges you for impressions, not sales, so you will be charged for CPM ads whether you make sales or not. This makes CPM unsuitable for campaigns where your goal is increasing sales or other non-awareness conversions.
Another potential problem could be how the advertising market you’re using measures “impressions”. Just because they place an ad on a page somebody has open doesn’t mean that the person is actively viewing, or even taking notice, of your ad. Think how many times you, as a viewer, scroll past ads with scarcely a glance.
It can be challenging to know just how relevant an audience is when you buy CPM ads. There is no easy way to know whether your ad interests the targeted audience or not – the way they react on-page is the same. This means that you have to be particularly careful when building your CPM ad audiences to ensure you don’t include irrelevant people and waste your marketing budget.
Another problem you may face is if you show your ads too regularly, it can cause your audience to feel ad fatigue. Put yourself in their shoes. How do you react when you see the same ad over and over again?
Calculating CPM
Remember that CPM represents your cost per 1,000 impressions of an ad. You can calculate this using the following formula:
For example, if you are being charged $100 for ads that receive 20,000 impressions, your CPM will be:
CPM = (100 / 20,000) * 1,000 = $5
Alternatively, a website may give you the CPM, and you want to work out what your total cost will be:
If you bid $5 as a CPM and generate 20,000 impressions, your cost will be:
Cost = (5 x 20,000) / 1,000 = $100
You can also just use our CPM calculator if you don’t want to do the math manually.
What Makes a Good CPM?
Stating a “good CPM” can be hard because it depends on many variables. The typical CPM of a Facebook ad will be different from that of a typical LinkedIn ad or the typical CPM of a sponsored Google ad.
Likewise, the prices you must pay for your CPM ads (and indeed other types as well) will vary greatly by niche. Ads promoting health products will have a completely different average CPM than those advertising sporting equipment or online gaming.
According to statistics collated by Databox:
- The median CPM for Facebook Ads is $7.40
- The median CPM for LinkedIn Ads is $20.27
- The median CPM for TikTok Ads is $2.92
BeProfit found that advertising on Google's Display Network ranges between $0.50 and $4 CPM, with an average of $3.12.
Factors Affecting Your Ads’ CPM
While factors may vary by advertising platform, the following will typically have an impact on the CPM you have to pay:
1. The size and demographics of your targeted audience – the more granular the audience you select for your ads, the higher your CPM is likely to be. This makes sense, as with a granular audience you are more likely to have valuable hits with interested people, compared to a wider audience of people who may only have a slight interest in what your ad promotes. Demographic factors, such as age, sex, location, and interests, affect the CPM you will face for your ads.
2. The level of publishing space available for your ads – how competitive is it in the advertising market for the terms you wish to target? Keyword search volume is an important metric in digital marketing. The more popular a term (whether it be on a search engine like Google, in a store, like Amazon, or in a social advertising marketplace, like Facebook Ads), the more competition there will be for advertising spots, and the higher the cost of advertising. The CPM (and indeed CPC) prices you face are a combination of supply and demand for a keyword; the supply being the amount of website space where you can place ads for a term, versus the demand, being the number of advertisers wanting to have their ads served for the term.
3. The time of year – in many niches the CPM you face is seasonal. This is particularly so for eCommerce firms (and indeed offline retailers running online ads) who have distinct times of the year when they make most of their sales. For example, many retailers have greatly increased sales in the lead-up to Christmas and they increase their promotions at this time of year. This increases the demand for scarce advertising space in key promotional periods and reduces it at other times.
4. The advertising platform you use – as we saw above, the average CPM on different platforms can vary considerably. This relates to the nature of the audience using each channel.
5. Your niche or industry – the CPM for ads in some niches/industries is higher than in others. SEMrush calculated the average CPM by industry in the USA in 2023, finding that Food delivery had the highest average CPM ($7.63), while Media had the lowest ($4.27).
6. The format of your ad – SEMrush also calculated the Digital CPM by ad type. They found that video was by far the most expensive format. Mobile videos had an average CPM of $11.10. More traditional, static ads cost less. For example, the average CPM for desktop display ads was $2.50.
Strategies to Maximize the Success of Your CPM Digital Marketing
1. Spend Time Targeting the Right Audience
We referred earlier to the problem of establishing whether people actually view your ads or not. The best way to minimize this problem is to create highly targeted lists using your advertising network dashboard. You can’t guarantee that people will view your ads, but you can work to ensure that your ads only appear before people who will have a realistic interest in them.
You should also build audiences on the network that match the particular stage of the purchasing funnel you wish to target. Most CPM campaigns, however, tend to be top-of-funnel, awareness-focused.
2. Create Narrow Audiences for Your Ads, Within a Broad Audience for Your Campaign
The narrower the audience you create, the greater the chance that you can create ads that will interest them. There is no value in serving ads to people with no, or only a tangential, interest in what you are promoting.
You can gain value from creating multiple audiences, and then serving different ads to each audience. Make sure you design each ad so that it appeals to the niche audience with which you’re using it.
For example, you may build a broad initial audience built on factors like age, sex, and location. You can then segregate these into multiple smaller audiences based on job titles, interests, previous purchases, etc. The tighter your connection to your audience, the lower your CPM will be, as long as you can build interest and connectivity with each audience.
There can be a fine line, however, between attracting interest in your ads by segregating your audiences and making your audience too niche. At some point, your audience will become too niche, resulting in too few impressions, and a higher CPM. You may have to experiment to determine where that tipping point is for your firm.
Your overall campaign should still be to a relatively broad audience, particularly if using CPM for marketing to the top of the funnel (and the top of any funnel is wider than its bottom). However, you can also gain value from delivering targeted ads to smaller more focused sub-groups.
3. Use Compelling Copywriting and Graphics in Your Ads
It’s easy to forget that most people aren’t looking forward to viewing your ads. Often, they look at ads as being the unwelcome price of using an app and try to bypass them as easily as possible. So, it’s your job to make your ads as compelling as possible, stopping the viewer from scrolling past without interest.
Your ad needs to explain your message clearly and succinctly, using a mixture of text and visual media (depending on the type of ad you’ve bid for). It needs to stand out from the competition – and by “competition” we mean anyone else who advertises to a similar targeted audience as yourself. Make sure you use awesome copywriting that pulls the reader in to read your message.
Similarly, if you’re using an advertising medium that allows you to include images or video, ensure you use high-quality photography and graphics that make your ads stand out from others on the page. You have to give the people you’re targeting a reason to interrupt whatever they are doing on the page to make the time to view your ad.
4. Be Prepared to Mix Ad Types in a Campaign if it Helps You Better Meet Your Goals
There is nothing to say that your entire advertising campaign needs to use CPM-priced ads. You can mix-and-match ad types and pricing models within a campaign, as you move people through different stages of the purchasing funnel.
As we have previously emphasized, CPM is particularly well suited to establishing brand awareness. Once people are aware of what you are offering, you can then use CPC (or even CPA) ads to move them closer to buying your products.
5. Monitor Ad Frequency to Avoid Ad Fatigue
We previously mentioned the problem of inducing ad fatigue in your audience. While familiarity may push a prospect further through the funnel to a point, at some stage they begin to ignore your message. Indeed, if you show your ads too often some people may become openly hostile towards your brand.
Therefore, you need to monitor the frequency at which ads are served to any particular lead. For example, many platforms include an ad frequency cap option where you can set the maximum number of times an ad may appear to a potential viewer or customer.
For example, when you create an awareness campaign in Facebook Ads, you can optionally set a Frequency Cap on your ads, in the section where you create your Ad Sets.
You can also reduce ad fatigue by making regular changes to your ads’ copy and images. People are less resistant to regular ads from a single advertiser if the ads vary frequently. This is particularly easy to do if you sell multiple products.
Wrapping Things Up
CPM advertising can be a realistic option for many businesses, particularly if you’re trying to attract new customers near the top of the purchasing funnel. There can be much value in focusing on CPM in digital marketing when you want to increase your brand awareness.
The most important thing you can do to minimize your overall cost is to truly understand your target audience. There is little value in serving ads to people who will have no interest in your brand or your products. Consider creating buyer personas and putting together a personalization strategy for your business.
