Cost per mille, also called cost ‰ and cost per thousand, is a commonly used measurement
in advertising.
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 is calculated by dividing the cost
of an advertising placement by the number of impressions 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.
Purpose 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 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
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.
Construction To calculate CPM, marketers first state the
results of a media campaign.
Second, they divide that result into the relevant media cost:
Advertising Cost / Impressions Generated For example:
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 = $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 defines eCPM as: ::A hybrid Cost-per-Click
auction calculated by multiplying the CPC times the click-through rate, and multiplying
that by one thousand.
x 1000 = eCPM.)
This monetization model is used by Google to rank site-targeted CPM ads against keyword-targeted
CPC ads in their hybrid auction.
In internet marketing, effective cost per mille is used to measure the effectiveness
of a publisher's inventory being sold 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.
This information can be used to compare revenue across channels that may have widely varying
traffic—by figuring the earnings per thousand impressions.
Example 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
"Fantastic Apps" has an eCPM of $25 Cost per Point or Cost per Rating Point
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 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.
See also CTR - Click-through rate
VTR - View-through rate CPI - Cost Per Impression
PPC - Pay per click CPA - Cost Per Acquisition or Action
Internet marketing CPC - Cost Per Click
eCPA - effective Cost Per Acquisition/action Compensation methods
References
External links Tutorial on the CPA / CPM / CPC / dCPM advertising
models CPM Bidding, Google Help
MASB Official Website