What does CPM mean in marketing?

 In digital marketing, CPM refers to what an advertiser pays for 1,000 impressions of an advertisement on a web page. What is important about CPM marketing when it comes to digital marketing is understanding the meaning of an impression. An impression means the ad, as an element of a web page, loaded and received a view. This isn’t the same as a page view.

Impressions vs. page views

You can often find the terms page view and ad impressions used interchangeably. While the two are similar, they are still different metrics. A page view occurs when a web page loads on a user’s browser and that user clicks through to another page.

By contrast, an impression indicates that an element of the page, such as an ad, loaded and appeared for the user to view. Depending on the advertising platform used and options chosen by the marketer, impressions can vary a great deal.

For example, each time a new user comes to a particular page on a website, they increase the page view count by one. However, the same advertisement may not show up each time for all those visits, so the impression count will not match the page view count.

Both these metrics have value for businesses and marketers. These metrics are also important for publishers who want to increase website traffic.

The importance of click-through rate (CTR)

CTR, or click-through-rate, refers to the number of clicks an advertisement receives from its impressions online. The formula for CTR is the number of clicks divided by the number of impressions. Multiply the result by 100 and you will see your ad’s click-through-rate.

The CTR can tell marketers and advertisers how well or poorly an advertisement performs, which is what makes this rate so important. You can use it, especially in conjunction with other metrics, to measure not just overall performance, but smaller things as well, such as copy effectiveness or if the title works well for the ad.

CTR also gives insight into how to proceed with a digital marketing campaign. For example, a very low click-through-rate can mean several things. Maybe the ad isn’t targeting the right people or perhaps the ad isn’t on the best websites or in the best position. Alternatively, the CTR can show that a targeted keyword or advertisement is working and can possibly do even better.

CPM vs. other types of paid search

CPM marketing isn’t the only type of pricing method for digital advertising. Other models can work well for you and help you grow your audience, depending on your particular needs. Some models can work alongside CPM marketing rather than as an alternative. It’s a good idea to familiarize yourself with the more common pricing models and paid search methods so you can make an informed decision on which to go with.

Pay-per-click (PPC)

The PPC, or pay-per-click model, involves paying for each click-through of an ad. The pay-per-click pricing model also falls under the term CPC or cost-per-click. The two aren’t the same thing, as CPC is more of a subset or metric of an overall PPC model. So, stay cognizant of that when you see the terms used interchangeably.

In this case, you are effectively paying for a more powerful targeting algorithm. The advertising platform will want your ads clicked, so they may receive better placement. However, this can also translate to a higher cost for advertising, especially since most PPC platforms involve bidding on the ad space. So, marketers should make sure the potential gains from a click-through far outweigh the costs of the click.

The SERP page ads you see are typically of this nature, so understanding how search engines work can help with PPC advertising.

Cost per action (CPA)

What makes a CPM a good CPM will depend on several factors, as the answer to the question is a very subjective one. A lot of those factors will depend on the goals and budget of the business running the advertisement campaign.

Generally, CPM marketing is more about quality than quantity. Sometimes a cheaper CPM can seem ideal, but if those impressions don’t turn into conversions, then they’re of lesser value than a pricier CPM strategy that nets results.

A good CPM is one that helps you meet or exceed your goals. If one business pays a pittance but comes out the other side with excellent results, and another business pays a premium, but also achieves their goals, then both these businesses have found a good CPM. And that’s despite the wide disparity between the amounts they paid.

As with most advertising methods, it can take some trial and error to find what works best for you or your business. Don’t judge CPM by cost alone. Judge it by results and its ROI if you want to find a good CPM.