CPM is short for “Cost-Per-Mille,” with mille being the Latin word for “thousand.” In other words, it’s the cost-per-thousand impressions (not to be confused with CPI, which could refer to cost-per impression or cost-per-install).
To boil it down, CPM is the amount advertisers pay to publishers for every thousand impressions an ad generates. This pricing model has long been used in online advertising, and according to Investopedia, it’s the most common method for pricing web ads.
While mobile ads have gone beyond banners and static images to interactive experiences, videos, and so on, the CPM model still has its place in the mobile advertising world. To calculate the cost-per-thousand views, take the total number of impressions and divide by 1,000. Then divide the campaign budget by that number and you have your CPM. Using this formula can help you figure out how much to budget and what your desired number of impressions will be.
The more traditional CPM advertising model varies a bit from newer forms of mobile and in-app advertising because it doesn’t require a specific outcome from users in order to be considered complete. For example, in cost-per-completed-view, advertisers don’t pay publishers until a video ad is watched in its entirety, so simply looking at the ad isn’t enough in that case. Similarly, cost-per-engagement advertising requires some kind of action beyond the initial impression, like taking a survey or playing a mini-game.
CPM in advertising strips away all of those newer approaches and takes marketing back to basics. And in some scenarios, that’s exactly what the product demands.
For game and app publishers, CPM is also an effective metric for estimating the amount of revenue they can expect to make by showing ads in their products. Any specific ad network’s estimated CPM (or eCPM) can be combined with other data points like an app’s daily-active-user count and/or the average number of ad impressions served to forecast the amount of resulting ad revenue they can expect to generate.
Knowing these figures, along with other critical metrics like retention and IAP conversion, is critical for any sophisticated mobile game publisher. It allows them to ensure that their development efforts are remaining net-positive, and clearly illustrates how much time and resources they should allot for updates or optimizations to their portfolio.
You might be asking yourself why advertisers still use CPM campaigns, as opposed to some of the newer types of pricing models discussed above. Aren’t completed views, proven engagement, clicks, and installs more important than impressions alone?
It’s a fair question, but the truth is, there are still situations in which a CPM pricing model is the right choice, strategically. Perhaps the most important use for CPM in advertising is brand-building. When a product or service is new, branding is essential. You need to get the campaign in front of users first and foremost. It’s rare for audiences to click on an ad for a product made by a brand they’ve never heard of. A CPM campaign is great for creating and elevating brand awareness in preparation for a more conversion-oriented campaign.
CPM campaigns can also help with nailing down your demographic. For example, if an ad is getting way more engagement on an entertainment website aimed at the 18-35 demo than a news outlet for older folks, you know you either need to target that younger group going forward or adjust your marketing accordingly. CPMs are a good way to gauge interest without breaking your advertising budget.
Plus, with the right ad placement, CPM in advertising can still see great clickthrough and sale results. Creating a campaign like that requires expertise and strategy, of course, but with the right marketing partner, you’ll be able to make CPM work for you.