CPM – cost per mille – is one of many important metrics that online marketers track in order to determine whether your ad campaign is working for you. By “working for you,” we mean getting more ad impressions and turning more leads into sales.
Below, the team at Digital Logic explains everything you need to know about CPM: what CPM is, how to calculate CPM, why CPM is important for advertisers to track, and more.
What is CPM?
CPM is a term used by online marketers that stands for cost per mille – also frequently called cost per thousand. “Mille” is a Latin word that means one thousand. So CPM means the total cost per one thousand impressions.
But what exactly are impressions?
In the digital marketing world, impressions are the total number of ad views on ad networks such as Google Adwords, Facebook ads, etc.
To break it down into even simpler terms:
When a CPM model is implemented, the advertiser pays a specific amount of money for every one thousand impressions their ad gets on the internet.
Tracking the total number of impressions is crucial for successful online advertising for a business because it can help you get the most out of your advertising campaign. It helps business owners better understand the cost of online advertising versus the realized rewards.
Benefits of Tracking CPM
There are several benefits of tracking CPM for an ad campaign, including:
- Increased Leads and Customers: If your ad campaign is getting lots of impressions and overall performing well, you will see more sales conversions. This means you will see more leads convert into actual customers.
- More Ad Visibility: Optimizing the number of impressions for each ad can help your business and brand stand out more compared to competitors.
- Promoting Your Business to Your Target Audience: Lastly, tracking CPM and placing your ad campaign on the right platforms can appeal to your target audience and, therefore, bring in more leads.
How To Calculate Cost Per Thousand
Calculating your CPM rate is really simple. Here is how you do it.
Creating Advertising Budgets
First, you need to set a total budget for your ad campaigns. As an example, let’s say you decide to set aside $10,000 for your online advertising budget.
Setting the Target Number of Impressions
Next, you need to set a goal of how many impressions you want to get from your ads. For the sake of this example, we will say that your goal is to get at least 250,000 ad impressions.
Free CPM Calculator
The CPM formula is simple. All you need to do is simply divide your total budget by your target number of impressions and then multiply that answer by 1,000.
$10,000 ÷ $250,000 = 0.04
0.04 x 1,000 = 40
In this example, your total cost for every one thousand impressions would be $40.
Our digital marketing experts have put together this free CPM calculator to move things along more quickly!
What is the Average Cost Per Impression?
Average CPM rates depend on a variety of factors, including your type of business, your ad budget, and your CPM model for pricing.
On average, though, most advertisers pay between $3 to $10 for every one thousand impressions.
Good CPM vs. Bad CPM
As a basic rule of thumb, a lower CPM is usually a better CPM. So the $40 that we used in our previous CPM formula example is considered bad for most businesses. Paying too much money for ads can tank your overall ROI (return on investment), which is not ideal for anyone, no matter the industry. You want to make sure you’re reaping the monetary benefits of your ad campaigns or AdWords management services, or else it’s not worth it.
Best Practices for Calculating Cost Per Thousand
Tracking your cost per mille is a powerful tool for not only bringing in more customers but also for developing the best digital marketing plan. You don’t want to just track CPM, though.
You should also be tracking other KPIs (key performance indicators) and metrics as well, such as the ones listed below.
- CPC stands for Cost Per Click. This means that you’re tracking how much you pay every single time someone clicks on one of your ads. CPC can be tracked on both search engines, like Google, and social media platforms. Your average CPC can vary on a variety of factors, like the ad’s ranking, how many competitors are bidding on the same keywords as you, the maximum bid for specific keywords, and more.
- CPA stands for Cost Per Acquisition or Cost Per Action. This measures how much advertisers pay every single time a new lead takes some sort of predefined action, such as clicking something, buying something, submitting a form, or even signing up for a newsletter.
- CTR stands for Click Through Rate. This metric is a ratio of the number of people who visit a website by clicking on an advertisement compared to how many people just view a page or an advertisement. In simpler terms, the click-through rate is a representation of how many people clicked on your ad after looking at it. Your CTR is a huge indicator of overall search engine advertising campaign success. The higher your CTR, the more successful your campaign is. Think about it: if little to no people clicked on the ad that you’re paying for, you’re doing something wrong.
- PPC stands for Pay Per Click. This metric measures how much you have to pay every single time someone clicks on your ad. Essentially, advertisers are paying PPC costs to send visitors to their site instead of waiting for visitors to find their site organically through a Google search.
- ROI stands for Return on Investment. This is a very important metric to track because it provides insight on if your digital marketing campaign is profitable or “worth it.” If you’re spending a fortune on ads and your ROI is bad, then something needs to change.
Create the Best Digital Marketing Strategy with Digital Logic
The world of digital marketing is complex and ever-changing. It’s extremely difficult for most business owners to keep up with the daily demands of their business and create a profitable online marketing strategy. That is where we come in.
Digital Logic is a full-service marketing agency.
The experienced team at Digital Logic can create an individualized marketing strategy for you and your business and track all those important metrics: CPM, CPC, ROI, and more. If you’re ready to grow your business, check out our free SEO audit service. We offer PPC management services, search engine optimization services, website development services, and social media marketing services.