What is CPM: Definition, How to Calculate and Optimization, and Differences with CPC and CPA

When you want to display ads online with the aim of brand awareness, CPM is one of the best costing options that you can choose. What is CPM? See the explanation in the following article.

What is CPM?

CPM stands for Cost per Mille or Cost per Thousand which means cost per thousand, because mille itself is Latin which means thousands. CPM is a paid advertising option where the advertiser pays a price for every 1,000 impressions the ad receives. An example of calculation for CPM is when an ad is calculated when the ad view has reached 1,000 impressions, that’s when the advertiser has to pay the advertising fee.

Impressions are calculated when someone sees a campaign on social media, search engines, or other marketing platforms. Facebook and Google are examples of platforms that use CPM as a calculation method. CPM calculations are performed by advertisers to understand whether the advertising costs they pay are worth the results they achieve. Advertisers can also analyze the quality of their ads based on the results of calculating the CPM of those ads.

Many advertisers use CPM calculations when the goal of their ads is brand awareness when they want to convey a certain message, and to generate trends that can lead to increased traffic and conversions. CPM only measures ads that have served 1,000 times, not whether the ad was clicked or not. To measure the number of times an ad is clicked, usually, the method used is the click-through rate (CTR). But advertisers also often measure the success of a CPM campaign by measuring its CTR.

CPM is a method of calculating advertising costs that are preferred by many platform owners because they are paid only to show ads. Even so, the CPM rates themselves are relatively low, so these platforms require high traffic to be able to make money from CPM ads. In 2021, the average CPM of ads on Facebook and Instagram will be $9 while the average CPM on LinkedIn and Twitter is around $6.50.

Differences between CPM, CPC, and CPA

CPM is one method for determining advertising costs. In addition to CPM, there are other pricing methods, namely Cost per Click (CPC) or what is often referred to as Pay per Click (PPC) and Cost per Acquisition (CPA). Check out the following table to understand more deeply the differences between CPM, CPC, and CPA.

CPM

Abbreviation: Cost per Mille
Definition: The metric used to calculate the cost of advertising per 1,000 impressions
Advertising payments occur when: Ad views (impressions) have reached 1,000 impressions
Most commonly used for: Awareness funnel-focused campaigns
Formula: CPM=Total advertising cost /Total Impressions x 1000

CPC

Abbreviation: Cost per Click
Definition: A metric used to calculate the cost of an ad after a user clicks on an ad Ad
Advertising payments occur when: When an ad is clicked
Most commonly used for: Campaigns focused on the consideration or conversion funnel
Formula: CPC=Total advertising cost/Total clicks

CPA

Abbreviation: Cost per Acquisition
Definition: A metric used to calculate the cost incurred to acquire a new customer
Advertising payments occur when: When a purchase occurs after clicking an ad
Most commonly used for: Funnel conversion-focused campaigns
Formula: CPA=Total advertising costs/Total conversions

How to optimize for CPM

Opti The lack of CPM advertising makes many social platforms and search engines such as Facebook and Google offer this method of calculating CPM. There are several ways you can do to maximize your CPM campaign, which is as follows.

1. Targeting the right people

By targeting the right audience and enhanced segmentation, the ads you place can have a chance to get more optimal results.

2. Pay attention to the frequency level

You must be able to pay attention to the frequency level of the ad seen by the audience so that the ad is not seen by the same account more than 3 times. The smaller the ad frequency level, the more optimal the ad results you will receive.

3. Use eye-catching visuals and copywriting

If you want to get optimal advertising results, make sure the visuals and ad copywriting that you create are interesting to see and read. So that the audience is interested in stopping your ad that is passing on their timeline and then viewing, watching, or reading the contents of the ad, even doing the CTA that you offer.

4. Add social proof.

In the last optimization method, you can convince the audience by including social proof in the form of endorsements from influencers or reviews of customer satisfaction with something you offer in the ad.

That was an explanation of the definition of CPM to how to calculate it. Hopefully, it can help you create the best ads with optimal results,