Everything you wanted to know about CPM but were afraid to ask
Nadia Ozeri, July 8, 2021
Nadia Ozeri, July 8, 2021
CPM – you’ve heard the term and probably even used it. But what does it really mean? CPM stands for cost per mille, which is the cost per thousand impressions. It describes how much it costs to publish and display an ad on a website 1,000 times. Publishers and advertisers both use this metric. To sell ad space, a publisher will determine their target CPM. Advertisers, however, cannot determine whether a CPM is good or bad based on a single value. Instead, you can decide if a CPM is a good or a bad result by looking at past performance data, benchmarking results against your market average, and evaluating the impact of CPMs on your ROI.
Although analysts and strategists now have a wealth of data and metrics to measure user engagement and ad effectiveness, CPM remains an important metric for publishers and advertisers. One reason is that it’s a long-standing industry standard. But it is also a valuable metric in some areas. For example, if advertisers target brand visibility, the CPM metric will help them estimate how many people they can reach online with their budget. In addition, by combining CTR (click-through rate) metrics with conversion rates, it’s a key metric for advertisers evaluating their investment on a site.
CPM values can be affected by a variety of factors. Prices will be affected by external factors such as geographical area and device type. It is influenced by the publisher’s supply of ad formats, ad viewability, website quality, and the number of ads per page, as well as by the advertisers’ targeting needs, their past results, and seasonality.
An average CPM will depend on how developed the online industry is in a given country and the purchasing power of the residents of that country. On average US, European, and Australian CPMs are higher than those in Egypt or Brazil. Mobile CPMs are lower than desktop CPMs due to the smaller screen size, lower CTR, and lower conversion rate.
Generally, larger ad formats have a higher CPM, as they are more prominent and more likely to entice the user to take action. But even though they are not the largest, the most common ad sizes generate higher CPMs.
Viewability scores will also drastically impact a publisher’s CPM rates. Viewable impressions for display ads are defined as having at least half the ad on the screen for a minimum of one second
A niche publisher will have a higher CPM because its audience is segmented and more homogenous than a general news site. As more businesses factor brand safety into ad placement evaluation, higher quality websites can command higher prices.
With more ad units on the page, CPM rates will decrease. The higher the supply, the lower the bids for those ads.
Advertisers value traffic quality and are keen to pay higher CPMs for placement in sites that drive conversions and a higher ROI. The need for targeted ads that segment users based on data will also increase the CPM prices. Traffic has some seasonality within different industries, leading to changes in CPM rates.
So what does this all mean? CPM isn’t going anywhere. Advertisers and publishers use this metric to communicate and share their needs. Even though CPM values may change frequently and are influenced by a variety of factors, such as supply, demand, and even external factors, they are still the best measure to determine value for ad real estate.
Nadia Ozeri is Director of Buy Side at Total Media and an expert in connecting advertisers to ad technologies. Find Nadia on LinkedIn or reach her by email at nadia(at)totalmediasolutions(dot)com.