24, Mar 2024


Understanding Cost Per Thousand (CPM): A Key Metric in Online Advertising

What Is Cost Per Thousand (CPM)?

Cost Per Thousand (CPM) is a marketing metric used to determine the price of 1,000 ad impressions on a webpage. Let's say a website publisher charges $2.00 CPM. This means that advertisers have to pay $2.00 for every 1,000 impressions of their ad. The "M" in CPM stands for "mille," the Latin word for "thousands."

Why Is CPM Important?

In today's digital age, online marketing is essential. CPM is a crucial metric because it allows advertisers to compare the cost-effectiveness of different advertising options. It acts as a risk-versus-rewards calculator, providing users with the direct cost of an advertisement and enabling them to assess and contrast various advertising vehicles. Generally, a lower CPM indicates a more practical option since it requires less money to reach an audience of 1,000 people. However, it's important to note that low-priced CPM strategies may not always be the best choice, especially if the targeted keywords have low search volume. Quality should always be prioritized over quantity when selecting advertising options.

How to Calculate CPM?

To calculate the CPM of an advertisement, divide the cost of the ad by the projected number of impressions it will generate, then multiply it by 1,000. For instance, if an ad costs $400 and is expected to generate 3,200 impressions, the CPM would be $125.


When it comes to pricing website ads, different methods are available, each serving a specific purpose. The choice of method depends on the campaign goals and overall intent.

  • CPM: Cost Per Thousand is most effective for increasing brand awareness. Placing an ad on a high-traffic website exposes the brand or message to a large audience, regardless of whether they click on the ad or not.

  • CPC: Cost Per Click focuses on promoting a specific product rather than building brand awareness. Advertisers pay for each click an ad receives. To calculate CPC, divide the price of the ad by the number of clicks it generates.

  • CPA: Cost Per Acquisition is used to price web ads based on visitor clicks that result in a purchase. This method targets the promotion of a specific product or service. To calculate CPA, divide the price of the ad by the number of acquisitions made.

Marketers may also opt for the Pay-Per-Click (PPC) method, where advertisers are billed for each click on their ads.

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