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

Cost Per Thousand (CPM)

Investopedia / Julie Bang

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."

Key Takeaways

  • Cost per thousand (CPM) is a marketing term that refers to the cost an advertiser pays per one thousand advertisement impressions on a web page. 
  • An impression is a metric that counts the number of ad views or viewer engagements that an advertisement receives.
  • CPM is one of several methods used to price online ads. Other methods include cost per click (CPC) and cost per acquisition (CPA).
  • Disadvantages of using CPM include incorrectly counting impressions due to duplicate views, ads that fail to load, and advertising fraud.

What Is Cost Per Thousand?

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.

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

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

What affects a CPM rate?

Numerous factors can affect a CPM rate. It can be swayed by the time of year or the season because holidays can influence impressions, increasing or decreasing them depending on the product or service being pitched. Other factors include supply and demand, ad format, and the platform and its audience.

How can I increase my CPM rate?

Enticing viewers to access your content is key to increasing your CPM rate because you can raise it in proportion to the growing size of your audience. Making sure your metadata is relevant to your content can be a good place to start.

What can lower a CPM rate?

Your CPM rate is logically influenced by bots and fake views of your site. These issues make it less valuable and attractive to your advertisers and your rate will have to adjust to accommodate them. Avoid boosting your impressions with spam content.

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.

Article Sources
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  1. WebFX. "How Much Does Facebook Advertising Cost in 2023?"

  2. Topmost Ads. "[2022] Twitter Cost Per Impression (CPM)."

  3. Cloudflare. "What Is Click Fraud?"

  4. Cloudflare. "What Is Ad Fraud?"

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