Cost per mille
Cost per mille (CPM), also called cost per thousand (CPT) (in Latin mille means thousand), is a commonly used measurement in advertising. It refers to the cost an advertiser pays for one thousand views or impressions of an advertisement. Radio, television, newspaper, magazine, out-of-home advertising, and online advertising can be purchased on the basis of showing the ad to one thousand viewers. It is used in marketing as a benchmarking metric to calculate the relative cost of an advertising campaign or an ad message in a given medium.
The “cost per thousand advertising impressions” metric (CPM) is calculated by dividing the cost of an advertising placement by the number of impressions (expressed in thousands) that it generates. CPM is useful for comparing the relative efficiency of various advertising opportunities or media and in evaluating the overall costs of advertising campaigns.
For media without countable views, CPM reflects the cost per 1000 estimated views of the ad. This traditional form of measuring advertising cost can also be used in tandem with performance based models such as percentage of sale, or cost per acquisition (CPA).
The purpose of the CPM metric is to compare costs of advertising campaigns within and across different media. A typical advertising campaign might try to reach potential consumers in multiple locations and through various media. The cost per thousand impressions (CPM) metric enables marketers to make cost comparisons between these media, both at the planning stage and during reviews of past campaigns.
Marketers calculate CPM by dividing advertising campaign costs by the number of impressions (or opportunities-to-see) that are delivered by each part of the campaign. Thus, CPM is the cost of a media campaign, relative to its success in generating impressions to see. As the impression counts are generally sizeable, marketers customarily work with the CPM impressions. Dividing by 1,000 is an industry standard.
To calculate CPM, marketers first state the results of a media campaign (gross impressions). Second, they divide that result into the relevant media cost:
- Advertising Cost ($) / Impressions Generated
- Total cost for running the ad is $15,000.
- The total estimated audience is 2,400,000 people.
- ($15,000/2,400,000) = $0.00625
- CPM is calculated as: $0.00625 x 1000 (meaning per thousand views) = $6.25
Note: Notice how the CPM is $6.25 and not $0.00625, this is because we are looking at cost per thousand.
- In online advertising, if a website sells banner ads for a $20 CPM, that means it costs $20 to show the banner on 1000 page views.
- While the Super Bowl has the highest per-spot ad cost in the United States, it also has the most television viewers annually. Consequently, its CPM may be comparable to a less expensive spot aired during standard programming.
Related Metrics and Concepts
Effective cost per mille
The Search Engine Marketing Professionals Organization (SEMPO) defines eCPM as: ::A hybrid Cost-per-Click (CPC) auction calculated by multiplying the CPC times the click-through rate (CTR), and multiplying that by one thousand. (Represented by: (CPC x CTR) x 1000 = eCPM.) This monetization model is used by Google to rank site-targeted CPM ads (in the Google content network) against keyword-targeted CPC ads (Google AdWords PPC) in their hybrid auction.
In internet marketing, effective cost per mille is used to measure the effectiveness of a publisher's inventory being sold (by the publisher) via a CPA, CPC, or Cost per time basis. In other words, the eCPM tells the publisher what they would have received if they sold the advertising inventory on a CPM basis (instead of a CPA, CPC, or Cost per time). This information can be used to compare revenue across channels that may have widely varying traffic—by figuring the earnings per thousand impressions.
- There are two banners: "Super Apps" and "Fantastic Apps."
- The publishers earn $1 per click.
- Both banners were published for the duration of one week.
- "Super Apps" was viewed by 2000 visitors from which 10 clicked on it.
- "Fantastic Apps" was viewed by 2000 visitors from which 50 clicked on it.
This shows that:
- "Super Apps" has an eCPM of $5 ($1 * 10/2000) * 1000
- "Fantastic Apps" has an eCPM of $25 ($1 * 50/2000) * 1000
Cost per Point (CPP) or Cost per Rating Point (CPR or CPRP)
CPP is the cost of an advertising campaign, relative to the rating points delivered. In a manner similar to CPM, cost per point measures the cost per rating point for an advertising campaign by dividing the cost of the advertising by the rating points delivered.
The American Marketing Association defines cost-per-rating point (CPR or CPRP) as:
- A method of comparing the cost effectiveness of two or more alternative media vehicles in radio or television. CPRP is computed by dividing the cost of the time unit or commercial by the rating of the media vehicle during that time period.
- CTR - Click-through rate
- VTR - View-through rate
- CPA - Cost per action
- CPC - Cost per click
- CPI - Cost per impression
- CPL - Cost per lead
- PPC - Pay per click
- Internet marketing
- Compensation methods
- American Marketing Association Dictionary. http://www.marketingpower.com/_layouts/Dictionary.aspx. Retrieved 2012-11-28. The Marketing Accountability Standards Board (MASB) endorses this definition as part of its ongoing Common Language: Marketing Activities and Metrics Project Archived February 12, 2013, at the Wayback Machine..
- http://www.sempo.org. Glossary of Terms. Retrieved 2012-11-28.
- Farris, Paul W.; Neil T. Bendle; Phillip E. Pfeifer; David J. Reibstein (2010). Marketing Metrics: The Definitive Guide to Measuring Marketing Performance. Upper Saddle River, New Jersey: Pearson Education, Inc. ISBN 0-13-705829-2. The Marketing Accountability Standards Board (MASB) endorses the definitions, purposes, and constructs of classes of measures that appear in Marketing Metrics as part of its ongoing Common Language: Marketing Activities and Metrics Project Archived February 12, 2013, at the Wayback Machine..
- Smith, Chris (February 1, 2012). "Super Bowl Ad Rates Can Double Within Ten Years". Forbes. Retrieved 1 October 2012.