CPM, or cost per thousand impressions, is a pricing model used in digital marketing to measure the effectiveness of an ad campaign. In the CPM model, advertisers pay a fixed amount for every 1,000 impressions (views) of their ad.
For example, if an ad has a CPM of $2.00 and it is displayed 1,000 times, the cost to the advertiser would be $2.00. If the ad is displayed 2,000 times, the cost would be $4.00, and so on.
The formula for calculating CPM is:
CPM = (ad spend / impressions) x 1,000
For example, if an advertiser spends $100 on an ad campaign and the ad is displayed 10,000 times, the CPM would be calculated as follows:
CPM = ($100 / 10,000) x 1,000 = $1.00 CPM
CPM is often used as a benchmark for measuring the effectiveness of an ad campaign, as it provides a way to compare the cost of an ad campaign to the number of impressions it generates. Advertisers may choose to use the CPM pricing model if they are primarily interested in increasing brand awareness and reach, rather than driving specific actions, such as clicks or conversions.
In digital marketing, CPM is used to price a variety of ad formats, including display ads, video ads, and native ads. Advertisers can choose to bid on CPM or use a different pricing model, such as cost per click (CPC) or cost per action (CPA), depending on their specific goals and objectives.