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What is a 'Cost Per Thousand - CPM'

Cost per thousand (CPM) is a marketing term used to denote the price of 1,000 advertisement impressions on one webpage. If a website publisher charges $2.00 CPM, that means an advertiser must pay $2.00 for every 1,000 impressions of its ad. The "M" in CPM represents the Roman numeral for 1,000.

BREAKING DOWN 'Cost Per Thousand - CPM'

CPM is the most common method for pricing web ads. Advertisers frequently measure the success of a CPM campaign by its click-through rate (CTR), the ratio of the number of times the ad is clicked compared to the total number of ad impressions. For example, an advertisement that receives two clicks for every 100 impressions has a CTR of 2%. An advertisement's success cannot be measured by CTR alone because an ad that is viewed but not clicked on may still have an impact.

CPM vs. CPC and CPA

CPM represents one of several methods used to price website ads. Other pricing models include cost per click (CPC), where the advertiser pays each time a website visitor actually clicks on the ad, and cost per acquisition (CPA), where the advertiser only pays each time a website visitor makes a purchase that can be directly traced to having clicked on that 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. In this case, the CTR matters less, since 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 do not actually click on the ad.

Companies focused less on mass appeal and more on promoting a specific product to a niche audience gravitate toward CPC or CPA advertising, since they only have to pay when visitors click through to their site or purchase the products being advertised.

Website publishers like CPM advertising because they get paid for simply displaying the ads. However, because CPM rates tend to be very low - the $2.00 rate mentioned above is fairly standard - a website needs robust traffic to make decent money from CPM ads.

Impressions vs. Pageviews

It is possible for the number of ad impressions to differ from the number of visitors to the website where the ad is displayed. For example, 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 alongside the page's text. In this scenario, the advertiser pays for two impressions per pageview.

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