Pay-per-click (PPC) campaigns have become a popular way for businesses to drive traffic to their websites and generate leads. One of the most important aspects of a successful PPC campaign is the cost per thousand impressions (CPM), which determines how much you pay for every thousand times your ad is displayed. In this article, we’ll explore what CPM is, how it’s calculated, and why it’s important in PPC campaigns.
Meaning of CPM: What is CPM and Why is it Important in Digital Marketing?
Cost per mille (CPM) is a type of pricing model often used in digital marketing.
The marketing approach you adopt for your business is essential: you need to consider all the marketing strategies available to you and, more importantly, the cost of implementing these strategies. Therefore, it may be useful to familiarize yourself with CPM and understand the pricing model used in digital marketing.
There are various forms of advertising and pricing models for advertising. However, one of the most common models in digital marketing is CPM. “Cost per mille,” often referred to by its acronym “CPM,” represents the cost that a seller will pay per 1,000 impressions of a digital ad.
Cost per mille is one of the pricing models that marketers and businesses can use in different ways. It is important to understand the use cases for CPM advertising, as well as how it works. CPM can be an excellent tool for businesses and anyone looking to promote their services or products.
Why is CPM important in PPC campaigns?
CPM is an important metric in PPC campaigns because it can help you determine the overall cost-effectiveness of your ads. If you have a high CPM, it means you’re paying more for every thousand impressions, which can impact your return on investment (ROI).
However, it’s important to note that CPM isn’t the only metric you should consider in your PPC campaigns. Other important metrics include click-through rate (CTR), conversion rate, and cost per click (CPC). CTR measures how often people click on your ad after seeing it, while conversion rate measures how often people complete a desired action (such as making a purchase) after clicking on your ad. CPC measures how much you pay for each click on your ad.
By analyzing these metrics together, you can gain a better understanding of the overall effectiveness of your PPC campaigns and make adjustments as needed to improve your ROI.
CPM vs other types of paid search
CPM marketing is not the only pricing method for digital advertising. Other models can be adapted to your business and help you grow your audience based on your specific needs. Some models can be combined with CPM marketing instead of choosing one or the other. Consider familiarizing yourself with the main pricing models and methods of paid search to make an informed decision when making your choice.
Cost Per Click (CPC)
In digital marketing, this term refers to the practice of paid advertising on the web. The principle is relatively easy to understand: an advertiser pays a sum of money to a publisher each time a prospect clicks on their ad. Cost Per Click is also called Pay Per Click (PPC).
With the CPC system, you pay for each click on your ad. Specifically, you must set a maximum Cost Per Click bid (also known as the max CPC bid). This corresponds to the maximum amount you are willing to pay for each click on your ad. In practice, you often end up paying a price lower than the max Cost Per Click.
If an internet user (potential customer) clicks on your ad, the cost of that click will not exceed the amount of your max CPC bid. The final amount that will be charged to you for each click is called the actual CPC.
Understanding how search engines work can be useful in PPC advertising.
Cost-per-action (CPA)
CPA, or cost-per-action, is an advertising pricing model that allows merchants to pay for a specific action taken on an ad. This model is effective for businesses with a very specific marketing goal.
The term “cost per acquisition” is also used. However, it refers to a particular action. For example, a merchant may pay for each conversion, which represents a higher level compared to an impression or click. Examples of actions for which you can pay in a CPA model include:
- A user signing up for an event or webinar
- A user signing up for a trial or mailing list
- A user purchasing an item or subscribing to a service
- A user responding to a survey or questionnaire
- A user sharing content on social media
The CPA model can be very useful to a business and its goals. However, it may not necessarily be the best method to start with. In some cases, it is better to start with other pricing methods to better understand which data sets will be most effective when choosing actions to pay for in a CPA marketing campaign.
How to calculate CPM?
Nothing could be simpler: divide the total cost of the CPM campaign by the number of impressions received. Multiply this result by 1,000, and you get the CPM. An online CPM calculator is also an option you can use.
What is a good CPM?
The answer to this question depends on several factors, as it remains highly subjective. Many of these factors result from the goals and budget of the company executing the advertising campaign.
In general, CPM marketing focuses more on quality than quantity. Sometimes, a cheaper CPM model may seem ideal, but if impressions do not turn into conversions, they are even less valuable than a more expensive CPM strategy that generates results.
The ideal CPM will be the one that helps you reach or exceed your goals. If a company pays a modest amount and achieves excellent results, and another pays a high rate and also achieves its goals, then these two companies have found an effective CPM, despite the price gap they paid.
As with most advertising methods, you will encounter failures before finding what works best for you or your business. Do not judge a CPM by its price alone. Consider the results and return on investment to find the one that works for you.
Benefits of using CPM
CPM strategies can have several advantages, which is why CPM is one of the most commonly used advertising pricing methods.
Reasonable budget
CPM is generally one of the cheaper options among all advertising pricing models. Costs may vary depending on several factors, but they are often less expensive compared to other forms of advertising, making CPM a cost-effective tool for businesses of all sizes.
In addition, you only pay for a fixed number of impressions. You can quickly use the information gleaned from these impressions, refine your ad, and launch another campaign without having to spend large amounts.
Brand reach and visibility
An ad on CPM can increase brand reach and visibility in various ways. Your ad will be seen by a large audience who can discover the products or services your brand offers. After all, you pay for actual impressions, not potential impressions. Visibility alone can generate awareness and recognition. This will help you in the short and long term, especially if you multiply your efforts and learn more about what works for your business in terms of marketing.
Lead generation
Advertising platforms that offer CPM pricing typically offer several ways to target potential leads, making CPM a very cost-effective way to improve your lead generation rate. This can be important for a business that would opt for a different, more targeted type of advertising campaign. By creating a directory of leads, businesses can more accurately identify their target audience and increase conversions.
Indicators
As we mentioned, CPM allows businesses to collect a significant amount of relevant data at a relatively low cost. Data, indicators, analytics, and other information can be directly used to improve the effectiveness of the next advertising campaign.
CPM offers many other benefits, but what makes this pricing method advantageous depends on the goals of the business using it. In addition, CPM works effectively as part of a broader marketing strategy, especially if it can effectively exploit the advantages of CPM.
Disadvantages of using CPM
Like any marketing method, CPM advertising has some potential disadvantages. One of the main ones is the quality of the traffic it generates. You may not know where the platform will decide to place your ad. It could even present your ad to an audience that is not interested at all.
Also, keep in mind that CPM is focused on impressions, which is different from clicks or conversions. Impressions can increase reach and awareness, but they do not necessarily lead to action.
Ad fraud is also a disadvantage. It occurs when a person tries to artificially inflate the number of impressions on a web page to overcharge companies using the CPM pricing model. Ad fraud can lead you to pay for impressions generated by bots. Make sure to work with a reputable platform if you opt for CPM marketing.
Is CPM advertising suitable for your business?
CPM can solve various problems for businesses that are struggling in the field of marketing. This pricing method is generally suitable for new or small businesses that are still looking for the right marketing approach. Nonetheless, big corporations can derive advantages from CPM advertising, particularly when incorporated into a broader marketing campaign. Its low cost and accessibility make CPM the ideal choice for companies with a low marketing budget or those looking to define their marketing budget.
To determine if CPM is suitable for your business, you will need to evaluate the benefits of this method and see if it can offer you a significant return on investment. All businesses can try CPM, so it is not necessary to use this method from the start. You may discover that it is appropriate for your business or realize that another advertising pricing method better meets your business objectives. For all the reasons we have mentioned, CPM is often at the top of the list compared to other pricing models for ads, in the context of marketing strategies for small businesses.
How to execute an effective CPM campaign?
To run a successful cost-per-thousand campaign, you must first ensure that your business benefits from the campaign. You can start the process and let it run without further thought, but most marketing specialists know that this type of advertising campaign requires some preparation. To help you get started, we’ve listed a few steps to follow for the successful use of the CPM method.
Define your budget and risk tolerance
Before you start, set a budget for your CPM campaign, and most importantly, stick to that budget. You should also evaluate your risk tolerance. Marketing campaigns are an investment, and every investment has an inherent risk. Can your business afford to lose the capital allocated to this project?
CPM can be a cost-effective strategy, but over time, these accumulated costs can become significant. If you simply want to test CPM and see what you want to do with it, start with a smaller budget.
Carefully plan your campaign
You can quickly reach a thousand impressions, but you need to be sure of the moment you want to broadcast your ads on a CPM basis and avoid doing so simply when they are ready. Seasonality can have an impact on the type of internet users who will see your ad or not. Additionally, CPM rates vary and can change with the seasons, or during events in specific industries.
Choosing an Advertising Platform
Choosing an advertising platform requires a lot of thought. You will find that there are many advertising platforms on the market, and various other platforms also include marketing services. Google’s Display Network is probably the most well-known platform for auction-based advertising, so consider creating a Google Ads account. However, if you want to communicate a specific message to a meticulously targeted audience, choose the platform that is most appropriate for that audience.
For example, if you want to run ads on social media instead of websites, make sure that the social media site in question has an advertising platform that includes CPM. Most social media sites offer these services, so it may be more advantageous to use them specifically for these platforms.
Creating the Ad
Create your ad and pay particular attention to each element that composes it. When in doubt, look for best practices to follow for specific types of ads and apply them. What works best for ads in one industry may not be effective in another, so keep these elements in mind when creating your ad. The options you have for creating an ad may have certain limitations depending on the advertising platform you are using.
Track Your Performance
Once your ad is online, be very attentive to its performance by setting up data tracking features. One of the main advantages of CPM ads is that you can quickly collect data about your ads and learn more about techniques to try for your next CPM ads.
Conclusion
CPM is an important metric in PPC campaigns that can help you determine the cost-effectiveness of your ads. By understanding how CPM is calculated and analyzing it alongside other metrics like CTR, conversion rate, and CPC, you can make data-driven decisions to improve the effectiveness of your PPC campaigns and generate better results for your business.
