Cost per thousand impressions (CPM) is a pricing model used in digital advertising that represents the cost per thousand ad impressions served to users. This model is commonly used for display advertising, where an advertiser pays a publisher to display their ad a certain number of times to users. The “M” in CPM stands for “mille,” the Latin word for thousand.

CPM is an important metric for advertisers and chief marketing officers because it helps them understand the cost efficiency of their digital advertising campaigns. By knowing the CPM for their ads, advertisers can determine how much they are paying per thousand impressions and can make more informed decisions about their advertising spend.

Calculating CPM is relatively straightforward. To calculate the cost per thousand impressions, divide the total cost of the ad campaign by the total number of ad impressions, and then multiply that figure by 1000. For example, if an advertiser spent $1000 on an ad campaign that resulted in 100,000 impressions, the CPM would be $10.

CPM is not the only metric used in digital advertising, however. Other metrics include click-through rate (CTR), cost per click (CPC), cost per lead (CPL), and cost per acquisition (CPA). These metrics provide additional insights into the effectiveness of an ad campaign and help advertisers to optimize their campaigns for better performance.

One advantage of the CPM model is that it allows advertisers to compare the cost of digital advertising with other types of advertising, such as TV or print. Because CPM is a measure of the cost per thousand impressions, it can be compared directly with the cost of other media that charges by the thousand impressions, such as billboards or magazine ads.

Another advantage of the CPM model is that it provides a degree of predictability for advertisers. Because they know the cost per thousand impressions, they can better estimate the total cost of their advertising campaigns and allocate their budgets accordingly.

However, one limitation of the CPM model is that it does not take into account the effectiveness of an ad campaign. Just because an ad is seen by a large number of people does not necessarily mean that it will be effective in driving sales or other desired actions. For this reason, advertisers need to look beyond CPM and consider other metrics such as CTR, CPC, CPL, and CPA when evaluating the performance of their campaigns.

In conclusion, CPM is an important metric for advertisers and chief marketing officers because it helps them to understand the cost efficiency of their digital advertising campaigns. By knowing the CPM for their ads, advertisers can make more informed decisions about their advertising spend and optimize their campaigns for better performance. While CPM is a useful metric, it is important to look beyond it and consider other metrics as well to evaluate the effectiveness of an ad campaign.

Here’s a calculator to get the CPM from the intended or quoted cost, and the expected impressions. Enjoy!