Cost Per Mille (CPM)
TL;DR
Also called cost per thousand (CPT), the Cost Per Mille pricing model charges advertisers a fixed price for every 1000 views/impressions, regardless of the fact that the ad was clicked on or not. It is a very commonly used advertising method especially when the goal of the campaign is to generate awareness and when the click through rate (CTR) is not relevant.
About CPM
The Cost Per Mille or cost per thousand advertising impressions is one of the main ad pricing models. Although it is very frequently used, CPM does not necessarily indicate the effectiveness of an advertisement/campaign. So when advertisers aim to increase conversions such as sales or registrations, they often prefer to choose other pricing models, such as cost per click (CPC) or cost per action (CPA) for planning their budgets.
When is the Cost per Mille used?
CPM is recommended to be used when the purpose of the ad is to generate brand awareness and for the ads in which impressions are more valuable rather than clicks in general (e.g.political campaigns).
However, this is the most popular pricing model for video advertising. Youtube is known for using this type of ad model, charging a flat rate per 1000 video views, with the price depending on the position in which the ad is placed on the users’ screen. It is also very widespread in media networks (TV, radio, newspapers, magazines, etc).
How is the Cost per Mille calculated?
The formula for CPM is the following:
Cost Per Mille = Cost of the Ad ($) / Number of Impressions Generated x 1,000
For example, if you invest $1200 in an ad and the total estimated audience is 150,000 people, then you will have a cost per mile of $1,200/200,000x1,000 = $0.006x1,000= $6. This means you will pay $6 for 1,000 impressions.
