CPM (cost per mille) and CPT (cost per thousand) both refer to the same model - the price for a thousand views. This marketing term denotes the cost for 1,000 impressions of an advertisement on a webpage. If a webpage publisher charges a CPM of $2.00, it means that the advertiser has to pay $2.00 for every 1,000 views of their ad. An impression is a metric that counts the number of ad views or audience engagements the advertisement garners.

CPM is one of several methods used to price online advertising; other methods include cost per click (CPC) and cost per action (CPA).

Among the drawbacks of using CPM are incorrect counting of impressions due to duplicate views, ads that don't load, and ad fraud.

Understanding Cost Per Thousand Impressions (CPM)

Cost per thousand (CPM) is the most common method of pricing web advertisements in digital marketing. This method relies on impressions, which is a metric that counts the number of digital views or engagements a specific ad garners. Impressions are also referred to as "ad views." Advertisers pay website owners a set fee for every thousand impressions of an ad.

Click-through rate (CTR) measures whether an ad was clicked on and represents the percentage of people who saw the ad and clicked on it. Advertisers often measure the success of a CPM campaign using CTR. For instance, an ad that two users click on out of every 100 impressions has a CTR of 2%. The success of an ad cannot be measured solely by CTR, as an ad that a reader views but does not click on can still have an impact.

CPM vs. CPC and CPA

CPM represents one of several methods used for pricing ads on websites. Another pricing model is cost per click (CPC), where the advertiser pays each time a website visitor clicks on an ad. Cost per action (CPA) is a method where the advertiser only pays each time a website visitor makes a purchase after clicking on an ad.

Different pricing methods are more suitable for some advertising campaigns than others. CPM makes the most sense for campaigns aimed at increasing brand awareness or conveying a specific message. In such a case, CTR matters less as exposure from having the ad placed in a visible spot on high-traffic websites helps promote the brand name or company message, even if visitors do not click on the ad.

Website publishers like CPM advertising because they get paid simply for displaying the ad. However, as CPM rates are low - the aforementioned $2.00 rate is fairly standard - websites need a lot of traffic to make decent money on CPM ads. Social media ad rates are higher and can vary depending on the platform. For 2021, the average CPM rate for social media ads on Facebook and Instagram was nearly $9, while the average CPM rate for LinkedIn and Twitter was around $6.50.

Impressions vs. Website Visitor Count

The number of ad impressions can be different from the number of visitors to the website on which the ad is displayed. An ad can get placements in two spots on a website, such as a horizontal banner across the top of the page and a vertical side banner next to the page's text. In this case, the advertiser pays for two impressions per page view.

Criticism of the CPM Model

Criticism of CPM often stems from issues with accurately counting impressions. Some advertisers question whether they are being charged fairly. Problems arise in relation to duplicate views from the same visitor or internet bots (short for "robots") that visit pages and skew the overall impression count. Also, if an ad does not load or loads incompletely, these ads should not count as impressions.

Source: Krcmic.com