When it comes to online advertising, there are several approaches one can take to monetizing their website’s ad space. Among the many choices are the most popular CPC (cost per click), CPM (cost per mille), and CPA (cost per acquisition) models. In this post, we’ll focus on CPM, outlining its meaning, its pros and cons, and finally its ability to positively influence your bottom line.
What is CPM?
The CPM abbreviation stands for cost per mille and refers to advertisers paying every 1,000 displays of their ads to potential customers. This arrangement is in contrast to other advertising models that will trigger payment via the number of clicks on an ad or portions of a sale derived from a specific display advertisement.
This interaction between ads and customers is referred to as impressions. So, in the CPM advertising model, advertisers pay a set rate for every 1,000 times, or impressions, their ads are displayed to users.
For example, if an advertiser wants to begin a campaign by which their ad will generate 1 million impressions, the advertiser will pay a CPM of $10. The 1 million impressions are broken down into 1,000 unit parcels according to the CPM model. So, with 1,000 units of 1,000 (CPM) impressions at $10 per unit, we end up with a total campaign cost of $10,000 for the 1 million impressions.
If you’d like to find out how much your next campaign should cost, you can use this advertising campaign calculator tool.
Pros And Cons Of The CPM Model
While it’s a good practice to know and understand all the advertising models in use, there are certain approaches that favor one industry over another. Currently, CPC and CPM models are the dominant advertising models.
- Easy to predict campaigns for advertisers
- Cost-effective for advertisers
- Guaranteed payouts for publishers
- Best for branding-oriented campaigns
- No testing required
- Lower payouts for publishers
- Not mobile optimized
- Advertisers pay regardless of user interactivity
- Susceptible to falsified interactions
How CPM Can Help Your Business
If you’ve got a popular product or service ready for market, CPM is one of the best ways to increase your reach and cast a wide net in search of clicks from interested users. CPM can help you budget accordingly when it comes to monthly and quarterly forecasting, as all payments are made upfront and for a set amount according to what advertisers want to spend. While performance is harder to quantify when compared to CPC and CPA advertising models, inventory is abundant and the CPM model can do make the most out of this landscape with relevant targeting from qualified partnerships.
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