How is CPM calculated?
CPM, otherwise known as cost per thousand, refers to the cost of an advertising campaign that reaches out to at least 1000 people. The “M” in the acronym is for the Roman numeral standing for 1000.
Calculating CPM requires a few important pieces of information.
- You need to find out how many impressions you expect your ad to have, or the number of times that your ad will be seen. In addition, you need to figure out the cost of the ad.
- Once you have that, divide the complete number of impressions by 1000. For example, if you have an ad that is seen 50,000 times you divide that by 1000 and get an answer of 50.
- Then the final step, divide the first step by the second step to find your CPM.
Quick version, your CPM is the ad cost divided by the amount of dividing your impressions by 1000.
If you do not want to do all the math, feel free to use our free CPM calculator above!
What is CPM?
By now you are aware of how to calculate your CPM. But do you understand what CPM is in general?
Now that you’ve been informed on how to calculate your cost per 1000 impressions, it’s important to understand the term CPM in general.
Digital marketers most commonly use CPM to assess the cost of online advertising. They do so because CPM gives an understandable figure to ad costs.
What is CPM in advertising?
CPM is an important advertising term in the world of a marketer. CPM in advertising allows you to see how much 1000 advertisement views, or impressions, would cost.
An easy way to understand CPM is by putting it in context. For example, if a website’s CPM charge is $5.00, that means that you, as the advertiser, would be paying that $5.00 every 1000 times your ad was seen.
After all, CPM stands for “cost per thousand impressions”!
You can calculate your CPM with our online CPM calculator or the CPM formula.
If you’re not satisfied with your CPM, WebFX can help. We have a team of over 50 specialists that can help you create a digital marketing campaign that is both successful and cost-effective. Our tried-and-true methods have created over 3 million leads, so we must be doing something right!
Why is calculating CPM important?
Marketing your business is a crucial part of your success. Without Internet marketing, it’s unlikely that your website will see the traffic it needs to rank well in search engines. It’s a domino effect, and if your website isn’t getting traffic, you’re likely not making many sales either.
When you calculate your CPM, using the CPM formula or our CPM calculator, you’re doing yourself and your business a favor by not only increasing brand awareness, but also measuring the impressions of each of your ad platforms. If you find that you’re not getting as many impressions as you’d expect on a certain platform, you’ll be able to shift your strategy in order to improve that number.
This ultimately results in higher brand awareness and more conversions overall.
CPM gives you valuable insight that can truly shift and shape the course of your marketing campaigns, which is why a cost per thousand impressions calculator is so useful.
Why calculate CPM with an online CPM calculator?
One of the biggest advantages of online campaigns is how easy they are to analyze and measure. With the right data (and tools), it’s easy to see just how far your advertising budget is taking you and the results your campaign is yielding.
If you enter impressions and total budget in our online CPM calculator, you’ll get your CPM instantly.
By calculating CPM, or the price you pay for 1000 ad impressions, you can decide whether or not the amount you’re paying is cost-effective for your business. Low CPM means that your ad is being displayed to Internet users at a relatively low cost, while a high CPM means that you’re paying more per view.
If you already know the CPM for an ad, and enter it along with the total number of impressions you want into our cost per impressions calculator, you’ll see how much that would cost you.
If you enter CPM along with your total budget, you’ll see the number of impressions you’d be able to have with that budget.
Now that you know the impressions, budget, and CPM of your campaign, you can make more informed decisions about your digital marketing strategy. Calculating your CPM with our CPM calculator also made it fast and easy for your team to get all this data.
What is the average CPM on each social platform?
You can utilize CPM as a strategy on Facebook, Instagram, YouTube, LinkedIn, Twitter, and Pinterest.
Check out the average CPM advertising cost on each of these platforms in the table below and see how your CPM compares with our cost per thousand calculator:
What’s the difference between CPC, CPM, and CPA?
Similar to CPM, CPC and CPA also exist and serve as other ways of pricing ads.
- CPC CPC, or cost per click, is very similar to CPM. However, with CPC, you pay for every time someone takes action and clicks on one of your ads. This is extremely useful when you’re promoting an ultra-specific product or service in a niche market.
- CPA CPA, or cost per acquisition, is when the promoter of the ad only has to pay when a purchase is made that can be tracked back to the buyer clicking on the ad that resulted in that purchase. If you’re going to utilize CPC or CPA, it’s important to have a high click-through rate since the goal of the ads is to ultimately have someone purchase the product that you’re advertising.
- CPM With CPM on the other hand, you only pay per 1000 impressions. Impressions essentially refer to how many people see your ad. They don’t have to take action (like clicking the ad) to be considered an impression. Click-through rate is less important with CPM since you’re not as worried about driving conversions as you are increasing brand awareness. This makes CPM rates extremely low and cost-effective.
Should I use CPM, CPA, or CPC?
As with every aspect of marketing, different techniques will be successful depending on the campaign type.
CPM often makes the most sense if your company is driven toward increasing awareness for your brand. It is also extremely helpful when your campaign is aiming to convey a detail-oriented message to your customers. It’s less focused on clicks and can be low in cost, making it great for low budgets.
On the other hand, CPC and CPA stand out as a fantastic choice if you are using digital advertising. If you’re focused on doing more than just making an impression on users and your end goal is a purchase, one of these options is the way to go.
When should you use CPC instead of CPM?
If the CPM of your ad campaign is too high to be worth the investment, or if you just aren’t seeing results, a CPC PPC campaign might be a better option.
With pay-per-click advertising, or PPC, you only pay for ads when people actually click on them. That way, if someone sees your ad and isn’t interested, you haven’t lost anything. If you use search engines, you’ve most likely seen PPC ads before.
In Google, for example, they can appear both at the top of the results and in a sidebar next to the results:
In this screenshot, every single result shown is actually a PPC ad. This means that if you were to click on any of them, the site owner would have to pay Google.
So how does Google (along with other search engines) decide who to show these ads to?
When advertisers create PPC campaigns, they choose a set of keywords they want to be listed for. In the example above, all of the ads shown are for businesses that wanted to reach people who searched for “web design.”
All PPC ads are not priced the same, though. The cost for each click is determined by an auction process, and each advertiser has to set a bid for the maximum amount they are willing to pay per click for specific keywords.
This means that broad keywords like “web design,” which a lot of companies will want to compete for, are more expensive than specific ones like “web design companies in central Pennsylvania.” The fewer bidders a keyword has, the less you will pay to advertise in its search results.
For many businesses, PPC allows them to maximize their marketing budget.