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Understanding CPM (Cost per mille)
For new and established ecommerce brands, getting in front of an audience through online advertising is vital. Paid ads on social media platforms are a common tool brands use to attract potential customers and increase brand awareness.
Cost per mille (CPM, also referred to as cost per thousand) is one of the more traditional metrics brands should pay attention to concerning advertising and marketing. At Tydo, we define CPM as the cost per one thousand impressions.
On a micro level, CPM is essentially the cost of what you pay for every 1,000 times your ad is viewed. Alternatively, a brand pays for cost/pay-per-click (CPC or PPC) whenever a user clicks an ad. Backing up a second, an impression is simply how many times an ad appears on a userâs screen.
While CPM is an important metric, like many others, itâs just a fragment of data connected to your brandâs marketing and advertising effectiveness.
How to calculate CPM
CPM by channel = (ad spend from channel A/ impression from channel A) x 1,000
Data sources: Connected ad channels (Google Ads, Meta, etc.)
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Example
Letâs say youâre running a paid ad campaign for your canned seltzer brand during May to kick off the start of summer.
You spend $10,000 on Facebook ads in a campaign called âCooling offâ in May. In Facebook Ads Manager, you see your ad has received 700,000 impressions. Your CPM for this specific campaign is: (10,000/700,000) x 1,000 = $14.29.
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Takeaway
We can think of CPM in the context of a billboard on the highway, and each passing car represents an impression.Â
CPM benefits your business by:Â
Increasing brand awareness. Digital advertising builds credibility and helps familiarize your target audience with your brand so that your business is top-of-mind when theyâre ready to purchase. Itâs especially helpful to look at CPM if your advertising focuses on brand awareness.Â
Drawing in credible leads. By setting relevant targeting and segment options, you can put your ads in front of those more likely to purchase. This helps with cost efficiency, too, as youâll want to place ads on different channels or apps where your target audience spends more time.
Creating buzz. High-quality Facebook ads get your audience talking and sharing, leading to potential traffic and higher conversion rates (which amplifies revenue efforts). Invest time and resources in high-quality creative and copy.
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Read more about CPM
What are impressions?
What are impressions in advertising? At a high level, we can think of impressions as how many times your ad comes across a userâs screen (can be on any deviceâmobile, tablet, desktop, etc).Â
Itâs helpful to understand impressions in the context of each ad platform. For example, for Google Ads, an impression is âeach time your ad is shown on a search result page or other site on the Google Network.âÂ
Meta defines the number of impressions as âthe number of times an instance of an ad is on screen for the first timeâ â but remember that they arenât the same as reach or engagement.
Impression tracking is widespread; however, itâs more difficult on some platforms than others. For example, if you run OOH ads, thereâs no easy way to estimate the number of impressions your billboard gets. Online campaigns on Facebook, Google, and TikTok can easily and concretely measure impressions. This is where CPM (cost per thousand) comes in.
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What is a good CPM?
It depends on a few factors:
- Budget
- Campaign objectives
- Industry
- Which ad networks (Facebook ads, Google ads, etc.) are used
- Click-through-rates (CTR)
- Goals for brand awareness
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For ecommerce businesses just starting, ad impressions are important as they increase brand awareness and boost the likelihood of customers visiting your site and purchasing.Â
However, Nick Bauer of Kynship says factors such as load time, negative ad feedback, or even decreased relevance related to creative or product could decrease CPM.
Focusing solely on a number (CPM) means youâre not looking at the entire funnel. Â
Jesse Pujji, founder and CEO of Kahani, says, "The best marketing teams Iâve seen know the marketing economics of each step of the funnel off the top of their head and are constantly optimizing these economics.â
CPM strategies are part of the entire funnel and can give you better insight into how campaigns run. Look at it holistically.Â
How to optimize your CPM
The funnel and marketing strategies you have in place determine how to optimize the audience youâve earned with CPM marketing.Â
If youâre focused on expanding brand awareness, CPMs are important, but they donât always lead to engagement or conversion. Instead, Barry Hott recommends focusing more on getting lower-cost conversions rather than cheaper impressions.Â
Pausing ads with higher CPM or CPC rates could mean cutting off an ad thatâs actually converting to more sales. Hott says, attempting to isolate your CPM as an external factor is not valuable. âRemember that CPM reflects ad performance, not a raw auction CPM.â
Test creative and display ad copy consistently to see what resonates best with your audience. This is the key to successful marketing strategies.
Reviewing metrics at the end of a digital marketing campaign allows you to see where to lean in or where changes must be made. Dara Denney at Thesis recommends tracking Facebook Ad metrics such as:
- Hook rate
- Hold rate
- Unique outbound click-through-rate
- Conversion rate
If youâre struggling with performance on Facebook and you notice that your ROAS is declining, take a look at these metrics:
CPM
Take a look at your audience. If youâre targeting a small audience, it means your platform has fewer options in terms of the audience you get to target. Consider broadening the parameters for your audience, if youâre in the prospecting stage of the funnel.Â
Regarding the middle or bottom of the funnel, try retargeting and opening up those parameters, too. For example, retarget those whoâve viewed or engaged with your ads, or users whoâve clicked on links.Â
CPC
Cost-per-click (CPC): the advertising total cost every time a user clicks on an ad.
- Mostly used for online advertising (search engine and social media platforms), where advertisers bid on specific keywords or target audiences.
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CPA
Cost-per-acquisition (CPA): the amount advertisers pay for every acquisition or conversion (such as a sale or lead).
- Best used in performance-based advertising. When advertisers want users to complete a specific action, such as signing up for email or making a purchase on their site.
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Overall, while CPM can be helpful in some contexts, making decisions based on single metrics (CPM or ) isnât that helpful and doesnât always correlate to the return on ad spend (ROAS), says Savannah Sanchez.
Instead, look at metrics such as website purchases, unique add-to-cart, and unique checkouts when tracking ad performance as well as blended metrics and then use that data to scale or make changes to creative. Â
