CPM is a central metric when it comes to optimizing your ads for the best possible performance. Understanding this metric at a core level can help you outcompete your competitors. In this article, I’m going to explain what it is and how to optimize your CPM.
What you’re also going to learn is that cheap CPMs aren’t always the best…
First, what exactly does CPM mean?
CPM stands for Cost Per Thousand, or Cost Per Mille (CPM), and is a frequently used term in marketing and advertising. It refers to the cost of generating 1,000 impressions for a specific advertisement. For example, if a channel or publisher is charging you $8 in CPM, that means you as an advertiser must pay $8.00 for every 1,000 impressions or “views”.
“Mille” is the Latin word for “thousand”. In theory, CPM does not tell you how many people saw your ad. The same person can see your ad twice and then is equal to two impressions.
Here’s how to calculate CPM: Total Ad Spend / Impressions * 1,000.
What’s A Good Target CPM?
Here comes the standard answer to what’s a “common”, “usual” or a “normal” target metric in marketing. It largely depends on the industry you’re in, how many competitors that are advertising for the same products or services etc.
Basically, you should try to analyze either past performance data or standard industry benchmarks to find the industry average. Based on this information, you can use that as “normal” in your industry, and determine that everything below or above that is a good target CPM.
Obviously, the goal with CPM is to reduce it as much as possible while at the same time maintaining the same quality of traffic.
Here are some general things you should know about:
- CPM is always more expensive in high GDP countries.
- CPM is always more expensive in seasons such as Black Friday/Week, Christmas season, pre-summer holidays and “back to school”-season. This is often when businesses run bigger campaigns and fight for attention.
- Although CPM can be up to 90% cheaper in low GDP countries, the quality of traffic may suffer.
Takeaway: Analyze past performance data and/or research industry averages to find a good benchmark. Everything lower than the industry average might be a good target for you. And also, remember to pay attention to the quality of your traffic when optimizing your CPM.
How Do You Optimize Your CPM?
By now you’re probably wondering; how do I optimize my CPM?
To be able to optimize your CPM, the natural first step is to first know how CPM rates are determined and influenced. Here are the most important factors;
- Ad Sizes: Larger ad sizes have on average a higher CPM. That makes sense because the more space you take up, the more eyeballs are watching the ad. Hence, the more expensive the impressions will be.
- Website Placements: Some websites are more expensive to place ads on than others. Niche websites with a highly engaged audience are more expensive than generic news sites.
- Geography: As explained above, countries with a higher GDP are often more expensive.
- On-page factors such as CTR, number of ads on the page and viewability etc.
Hope this article was helpful and remember to measure this metric closely. If the CPM is increasing steadily, it might mean more and more people are becoming tired of seeing your ads (also called, “ad fatigue”), and you should consider to update or refresh your creatives.