Cost Per Thousand (CPM)
Cost Per Thousand (CPM) refers to the advertising cost of reaching one thousand impressions or views of an advertisement. It is a standard metric used in Digital Marketing to measure the efficiency of advertising campaigns.
CPM is calculated using the formula:
CPM = (Total Cost of Ad / Total Impressions) x 1000
Example 1: If an advertiser spends $500 on a campaign that generates 200,000 impressions, the CPM would be:
CPM = ($500 / 200,000) x 1000 = $2.50
Example 2: An online video ad costs $1,000 and receives 500,000 views:
CPM = ($1,000 / 500,000) x 1000 = $2.00
Use Case: A brand wants to launch a display ad campaign. They choose a platform that charges $4.00 CPM. If they want to reach 1,000,000 potential customers, they would need to Budget:
Total Cost = CPM x (Total Impressions / 1000) = $4.00 x (1,000,000 / 1000) = $4,000