Cost Per Thousand (CPM) Definition and Its Role in Marketing

What Is Cost Per Thousand (CPM)?

Cost per thousand (CPM), also referred to as cost per mille, is a marketing term that's used to denote the price of 1,000 advertisement impressions on one web page. An advertiser must pay $2.00 for every 1,000 impressions of its ad if a website publisher charges $2.00 CPM. The "M" in CPM represents the word "mille," which is Latin for "thousands."

Understanding Cost Per Thousand (CPM)

Cost per thousand (CPM) is the most common method for pricing web ads in digital marketing. The method relies on impressions, a metric that counts the number of digital views or engagements for a particular advertisement. Impressions are also known as "ad views." Advertisers pay website owners a set fee for every thousand impressions of an ad. An impression measures how many times an ad was displayed on a site, but it doesn't measure whether an ad was clicked on.

The click-through rate (CTR) measures whether an ad was clicked on, representing the percentage of people who saw the ad and acted on it. Advertisers frequently measure the success of a CPM campaign by its CTR. An advertisement that receives two clicks for every 100 impressions has a 2% CTR. But you can't measure an advertisement's success by CTR alone because an ad that a reader views but doesn't click may still have an impact.

CPM vs. CPC and CPA

CPM represents one of several methods used to price website ads. Another pricing model is cost per click (CPC) where the advertiser pays each time a website visitor clicks on the ad. Cost per click is also known as pay per click (PPC). Cost per acquisition (CPA) is where the advertiser only pays each time a website visitor makes a purchase after clicking an ad.

Different pricing methods are more appropriate for some ad campaigns than others. CPM makes the most sense for a campaign focused on heightening brand awareness or delivering a specific message. The CTR matters less in this case because the exposure from having an ad prominently placed on a high-traffic website helps promote a company's brand name or message, even if visitors don't click on the ad.

Website publishers like CPM advertising because they're paid for just displaying ads. But a website needs robust traffic to make decent money from CPM ads because CPM rates are low. The $2.00 rate is fairly standard.

Rates for social media advertising tend to be higher and they can vary depending on the platform. The average social media advertising CPM for Facebook is $7.19 in 2023. The average CPM for the Twitter platform was about $6.60 in 2022.

Impressions vs. Page Views

The number of ad impressions can differ from the number of visitors to the website displaying the ad. An ad might receive placement in two locations on a website, such as a horizontal banner across the top of the page and a vertical side banner beside the page's text. The advertiser pays for two impressions per page view in this scenario.

Frequently Asked Questions

The Bottom Line

Criticism of CPM often stems from the challenges of accurately counting impressions. Some advertisers question if they're being charged fairly. Problems arise regarding duplicate views from the same visitor or from Internet bots (short for "robots") visiting sites and skewing the total number of views. And these ads should not be counted as impressions if they fail to load or incompletely load.

Advertising fraud can also happen when an unscrupulous site owner uses automated scripts to send traffic to a website with the purpose of increasing the number of views.