KPI ExamplesCost Per Thousand (CPM)

Cost Per Thousand (CPM)

Cost per Thousand (CPM) represents the cost an advertiser pays for 1,000 impressions of an ad. It serves as a standard unit of measurement to gauge the efficiency and reach of an advertising campaign. It's also used as a bid strategy for CPM advertising campaigns or to measure the effective CPM on other campaign types, such as Cost per Click (CPC) campaigns.

CPM

Budget Efficiency

Make real-time decisions about where to allocate the advertising budget based on cost-effectiveness for ad impressions.

Driving Reach

A low CPM provides more visibility, useful for scaling campaigns as advertisers pay less to reach more people.

Optimization

Helps refine ad designs and placements for better performance of CPM marketing campaigns.

Client Reports

CPM quantifies visibility, simplifying client expectations and reporting on reach and advertising costs.

Gauging Campaign Reach and Value

Why CPM Is Important

CPM is a key metric that helps marketers understand the economics of advertising cost and reach. CPM stands for "Cost per Mille," where "Mille" is Latin for a thousand. In advertising, CPM represents the cost of 1,000 impressions on a digital platform. It's a standard metric used to evaluate the cost-effectiveness of an ad budget as well as the reach of an advertising campaign.

In essence, CPM clarifies how much bang advertisers get for the buck regarding impressions. For instance, if it's costing an arm and a leg to spread a brand's message far and wide, CPM will be the first metric to provide that reality check. It provides a straightforward way to compare the cost-efficiency of different campaigns or advertising platforms.

Why KPIs are Important to Track
Measuring Reach and Engagement

How CPM Relates To Other KPIs

CPM has a direct impact on other key performance indicators (KPIs) like Click-through Rates (CTR), Return On Ad Spend (ROAS), and ROI. 

High CPMs are a red flag, signaling that campaigns might be spending too much without adequate returns.

Conversely, a lower CPM often suggests the CPM campaigns are reaching more people for less, potentially boosting other metrics. However, quality often trumps quantity in the digital space, so it’s important to balance the CPM against other KPIs, such as conversion rate and average order value, to ensure the investment reaches the right people. 

How Marketing KPIs Impact Each Other
A good metric is something that can be quickly and easily translated into a result, whether that be positive or negative. If the goal is to increase brand awareness, then impressions or reach become extremely important. If sales are the end game, then ROAS is king.
Sam Yielder, Squidgy
CPM Formula

How To Calculate CPM

Calculating CPM doesn't require a degree in rocket science, but it does offer rocket fuel for campaigns. The formula focuses on two main components: the total cost of the campaign and the number of impressions garnered. This calculation is crucial, not just as a standalone figure, but as a baseline to judge the cost-effectiveness of various advertising ventures.

Here's the fun part—the formula. To calculate the CPM, divide the total cost of the campaign by the total number of impressions. Since CPM represents the Cost per Thousand impressions, multiply that quotient by 1,000.

CPM Calculation Formula

CPM
=
Total Cost of Campaign
/
Total Impressions
X
1000

What Is a Good CPM?

A low CPM doesn't always equate to a slam dunk. It may be great for raw impressions, but the context is crucial. 

For instance, getting a low CPM is of little benefit if the click-through rate (CTR) and conversions are abysmal. Throwing money into a less-expensive black hole helps no one.

Generally, a good average CPM offers high visibility at a cost that doesn't break the bank and aligns well with other performance metrics.

What Is a Bad CPM?

A high CPM, on the other hand, isn't automatically bad but should flash some warning lights on any marketing dashboard. 

When marketers are paying top dollar for impressions but not seeing corresponding spikes in engagement or conversions, it's time to reevaluate.

Particularly with auction-based platforms, there may be opportunities to scoop up a slightly smaller slice of the pie with a substantially lower CPM by adjusting max bids.

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Client Focus on Metrics

Why CPM Matters to Clients

Getting the most bang for the buck is what every client wants. CPM shows how cost-efficient an ad campaign is at generating impressions and reach. For clients, CPM represents a clear benchmark of success in online advertising.

A lower CPM means more impressions for less money, maximizing the reach of digital marketing efforts. In a CPM campaign, this could be the difference between being a needle in a haystack and being the haystack.

Why Marketing KPIs Matter to Agency Clients
Agency View on Metrics

Why CPM Matters to Agencies

Even when not bidding using CPM pricing models, Cost per Thousand is essential for budget pacing and managing reach-focused ad campaigns. Agencies view CPM as a vital performance metric for different reasons. Efficient CPM rates validate an agency's capability to deliver broad audience reach at a reasonable cost. 

The metric also informs strategic decision-making; it reveals which advertising platforms offer better value. High CPM values on specific channels warrant immediate strategy reassessment. Agencies leverage a CPM model to optimize resource allocation, ensuring clients receive maximum impact for their investment.

Why KPIs Matter to Marketing Agencies

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Best Practices When Analyzing and Reporting on CPM

Conducting a comprehensive analysis of CPM through various lenses sets the stage for more effective and efficient advertising campaigns.

1

Analyze CPM Over Time

Assessing CPM over a specific timeframe offers valuable insights into the effectiveness of advertising strategies. A rising CPM indicates increased competition or less effective ad placements. Conversely, a decreasing CPM suggests the need to be more cost-efficient. Periodic weekly or monthly analysis helps spot these trends and adjust the strategies accordingly.

2

Compare CPM Across Channels & Campaigns

Not all channels or campaigns are created equal, and CPM reflects that. Compare the CPM of different platforms like Google Ads, social media, or email marketing to identify which is most cost-efficient. This comparison aids in reallocating the budget to channels that provide better value for each impression.

3

Interpret Trends and Anomalies in CPM

Sudden spikes or drops in CPM may require immediate attention. A sudden increase might be due to seasonality or bid pressure from a competitor that has entered the space. A sudden drop, while seemingly positive, could mean less competition and less visibility or relevance.

4

Put CPM in the Context of Other Metrics

When presenting CPM data, placing it within the broader context of other key metrics like click-through rate (CTR) and conversions is critical. CPM alone might not reveal much, but it provides a more complete picture of campaign effectiveness when analyzed alongside other metrics. For example, a low CPM combined with a high CTR usually signals a well-optimized campaign.

5

Visualize CPM Performance

Numbers on a sheet are daunting. Turn those digits into easily digestible visuals. Trends in CPM become more apparent, and clients quickly grasp how fluctuations in CPM correspond to other metrics or campaign changes. Data visualizations not only make the data more accessible but also more actionable.

6

Align With Client Goals

Complete the reporting by connecting the dots between CPM and the client's specific objectives, whether increased brand awareness or more online sales. Demonstrating that a favorable CPM leads to strong goal completion rates will validate the agency’s efforts and cement the value of CPM as a crucial metric in the client's eyes.

Reporting on CPM

Facebook Ads Dashboard Example

AgencyAnalytics offers customizable reporting features that make reporting Facebook Ads performance easy. Here, CPM is part of a suite of metrics presented in an intuitive and interactive dashboard. Get timely data updates and cross-reference CPM with other key indicators like CTR, Clicks, Engagement, and Conversions to provide a holistic view of the campaign's efficiency.

Facebook Ad integration with AgencyAnalytics KPI Dashboard Example

Related Integrations

PRACTICAL ADVICE

How To Improve CPM

Improving CPM leads to more cost-effective digital advertising campaigns. Here are three unique and actionable tips to reduce the cost of CPM campaigns.

1

Refine the Target Audience

A scattergun approach rarely works well in advertising. Narrowing down the target audience on platforms like the Google Display Network increases the ads' relevance and either lowers the CPM or makes the spend more relevant. Platforms like Facebook allow granular audience targeting based on various factors, from location to interests.

2

Optimize Ad Design and Copy

The CPM pricing model is also influenced by how engaging an ad is. High-quality graphics and compelling copy are more likely to capture attention, leading to a better engagement rate. The more users interact with an ad, the more platforms view the ad as relevant to the audience, potentially lowering the average CPM.

3

Adjust Max Bids for Lower-Cost Placement

Playing with bid settings is a strategic move to lower CPM. Reducing the maximum bid limits the amount an advertiser is willing to pay for 1,000 impressions. While this may take the brand out of highly competitive placements, it opens up more opportunities in lower-cost ad inventory.

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