CPM is a marketing mainstay for good reason and when properly deployed can be an impressively powerful metric, says Nadia Ozeri of Total Media Solutions.
Cost-Per-Mille – or cost-per-thousand impressions – is an often-misunderstood ad pricing metric. Although a commonly used term, the fundamentals of CPM are sometimes shrouded in confusion – including how it’s affected by variables such as geographic region, device, and ad unit, among others.
Three key factors when determining CPM
Knowing what affects CPM is essential for valuing ad inventory and allocating budgets. There are three key factors to take into account:
- Publisher factors: How advanced the online industry is in a particular region and the purchasing power of that region’s residents both influence how valuable an ad is. Ad formats such as video, interactive, or shoppable, for instance, could mean a higher CPM than standard display ads. In the UK, the CPM of video ads can range from $3 to $10, while display only costs between $1 and $2. Greater disposable income in a given region also boosts the average CPM.
- Device variables: On what device an ad appears can greatly change the conversion rate. Desktop still achieves a higher conversion rate than mobile, despite mobile traffic being higher globally. Ad size can also have an impact on CPM, with smaller ads being less likely to catch the eye of customers, and therefore costing less. Similarly, how visible an ad is on a web page changes its CPM.
- Audience segments: The more viewers on a webpage, the higher the CPM. Specialist publishers can also command a higher CPM thanks to their segmented audience with shared interests. These allow publishers to target specific customers more easily and tailor their ads to niche interests.
The consistency advantage
Despite all the factors that can affect CPM, the price is predictable for a marketer because they pay what they bid.
Campaigns can be optimised within the constraints of their media spend, and marketers can guarantee reaching a target number of customers for a specified budget by setting their maximum CPM. The goal should always be maximising visibility within a budget.
For example, you are looking to gain 30,000 impressions a day on an ad. If the CPM for the publisher you were looking at was $2, you can be assured that you will hit the target impressions with a budget of $60.
There are also other hidden costs that marketers can avoid through CPM that could be racked up through the use of other metrics. Take the example of Cost-Per-Click, which charges marketers by the click rather than the impression. The problem is this method incentivises fraud, such as click-injection and click-spamming schemes, that can part marketers with significant chunks of their budgets.
In fact, the CEO of ClickGuard pointed out that a previous business was at one time haemorrhaging a fifth of its ad budget due to fraud. CPM provides marketers with the transparency and peace of mind that some other metrics can’t.
Getting the full impression
That said, finding the true value of a campaign doesn’t rely on only one metric, but a broader view of marketing efforts. Google announced in September 2021 that data-driven attribution would be the default measurement method in Google Ads rather than the previous last-click version. As marketers look to make the move from last-click to a more holistic view, a CPM focus can slot neatly within this as it gives a more accurate picture of how different creative is performing and contributing to the overall success of a campaign.
Take the example of Crédit Agricole Italia, a financial services firm that wanted to investigate the value of its display ads. After switching to a more holistic approach of campaign measurement, the firm found display ads were winning over consumers at the upper funnel stage of the purchase journey and leading to an 8% increase in overall incremental conversions all while keeping the cost per lead 8% lower.
By focusing on impressions over clicks, display campaigns can also be more creative and engaging, while not having to hinge on an obvious call-to-action. Family-owned perfume house Guerlain’s recent banner ads featured a ‘3D Swirl’ of their distinctive perfume bottles which customers could explore. Not only did that see a three-fold increase in ad engagement, but there was also a 17.2% increase in customer purchase intent.
CPM is no silver bullet, but it remains a measurement mainstay due to its reliability and consistency in advertising campaigns. As part of a wider data-driven approach to attribution, marketers can be confident that CPM means they are paying for the true value of media and optimising to the metrics that matter.