CPM, What is it?

Cost per mille (CPM), also called cost ‰ and cost per thousand (CPT) (in Latin mille means thousand), is a commonly used measurement in advertising. Radio, television, newspaper, magazine, out-of-home advertising, and online advertising can be purchased on the basis of what it costs to show the ad to one thousand viewers (CPM). It is used in marketing as a benchmark to calculate the relative cost of an advertising campaign or an ad message in a given medium. Rather than an absolute cost, CPM estimates the cost per 1000 views of the ad. This traditional form of measuring advertising success can also be used in tandem with performance based models such as percentage of sale, or cost per conversion (CPA).
An example of computing the CPM:
  1. Total cost for running the ad is $15,000.
  2. The total audience is 2,400,000 people.
  3. CPM is calculated as CPM = ($15,000/2,400,000)*1000 = $6.25

Examples

  • In online advertising, if a website sells banner ads for a $20 CPM, that means it costs $20 to show the banner on 1000 page views.
  • While the Super Bowl has the highest per-spot ad cost in the United States, it also has the most television viewers annually. Consequently, its CPM may be comparable to a less expensive spot aired during standard programming.

Effective cost per mille

Effective cost per mille (eCPM) is used to measure the effectiveness of a publisher's inventory being sold (by the publisher) via a CPA, CPC, or CPT basis. In other words, the eCPM tells the publisher what they would have received if they sold the advertising inventory on a CPM basis (instead of a CPA, CPC, or CPT basis). This information can be used to compare revenue across channels that may have widely varying traffic - by figuring the earnings per thousand.
 Example:
  • There are two banners: "Super Apps" and "Fantastic Apps".
  • The publishers earn $1 per click.
  • Both banners were published for the duration of one week.
  • "Super Apps" was viewed by 2000 visitors from which 10 clicked on it.
  • "Fantastic Apps" was viewed by 2000 visitors from which 50 clicked on it.
This shows that:
  1. "Super Apps" has an eCPM of $5 ($10/2000 * 1000)
  2. "Fantastic Apps" has an eCPM of $25 ($50/2000 * 1000)