How can I use CPM to forecast my advertising budget?
Cost-per-mille, or CPM, is what digital marketers charge advertisers per 1000 impressions. Fun fact, Mille is Latin for One Thousand. CPM is an industry standard metric that allows marketers to quantify the cost of 1000 digital impressions.
If you’re new to the world of advertising, an impression is a unit used to measure a view of advertising content.
CPM= 1000* cost/impressions
This formula is universal so it can help you calculate either the CPM, cost, or number of impressions. I want to use an automated calculator you can find one here.
How can we put the concept of cost-per-mille into practical application?
Let’s say you want to advertise your business on a website that has 375,000 impressions. If your advertising budget is $3000, your CPM is $8.
1000* 3000 / 375000 = $8
What is industry average CPM?
CPM rates vary dependent on the platform you are using for your advertisement. There is a wide range, anywhere from $.25 to north of $200. Rates can climb if you are advertising niche products to a select market. According to adstage.io, in the first quarter of 2018 average CPM across the industry was $2.80.
To give you an idea of average costs, here is the average CPM per Social Media Platform.
CPM vs. CPC vs. CPA
Cost-per-mille is the most used metric for pricing, you can thank mediums like television and print for this. CPM is how advertisements have traditionally been priced.
As the adversiting industry has transformed to cater to new platforms, so have some of the pricing metrics. For digital content, other commonly used metrics are CPC or cost-per-click, and CPA or cost-per-acquisition
CPC or cost-per click is exactly as it sounds. Instead of paying by number of impressions, an advertiser is paying when a potential buyer clicks on your advertisement.
CPA or cost-per-acquisition (sometimes it can be referred to as cost-per-action) is the cost an advertiser pays when somebody purchases their product and it can be tracked back to the buyer clicking on the ad leading them product.
Which metric works best for me?
This will largely depend on the product, service or information you are advertising. If you are looking to build general awareness for your product or service. The best metric for you to consider would be cost-per-mille.
For products / services that are targeting an extremely specific audience you might be better off thinking about CPC or CPA. These metrics might help you take a more targeted approach for your advertising campaign.
CPM is a useful metric to employ if you are looking to build general awareness for your product or service. It is one of the older metrics used in advertising as it was employed by print and television.
In the advent of digital marketing, CPC and CPA came to be useful metrics. If you are advertising a more niche product or service I would recommend doing more research around whether CPC or CPA would be better for you.