Cost per Thousand (CPM) Definition and Its Role in Marketing

What Does Cost Per Thousand (CPM) Mean?

Cost per thousand (CPM) refers to the average cost a company pays for 1,000 advertisement impressions; it is a metric (and a pricing model) used in digital marketing. The abbreviated version of the term is "CPM" (even though the acronym for cost per thousand is "CPT") because the word mille—as in "cost per mille"—is the Latin word for one thousand.

In digital marketing, an impression occurs every time a consumer views an advertisement. CPM is generally utilized in two ways: as a metric, it can help companies measure how efficient their advertising efforts are by elucidating how much they are paying for 1,000 views of their digital advertisements. As a pricing model, it is used to represent how much a digital publisher charges for advertising space on its digital properties and websites.

Understanding Cost Per Thousand (CPM)

Companies traditionally had only a few options to advertise their products and services—notably, through print, radio, and television. Over time, these options grew to include various types of online advertising. Several metrics have been created to help companies determine how well their advertising works. One of these is cost per thousand (CPM).

CPM is one of the most common methods for pricing website advertisements in digital marketing. This pricing method relies on impressions; an impression is a metric that counts how many times consumers view ads. Viewers may do nothing more than glance at an ad—they may not click on it or interact with it. However, the premise for counting impressions is the possibility that viewing the ad created awareness about the product or service.

Advertisers and digital publishers count impressions, and metrics can be generated from their counts. For example, many websites charge a set fee for every 1,000 impressions of an ad.

CPM and Click-Through Rate

The click-through rate (CTR) is a metric that measures how often an ad is clicked on. Advertisers frequently measure the success of an advertising campaign by its click-through rate because it's preferable for a consumer to click on an ad (versus just viewing the ad).

Cost Per Thousand (CPM) vs. Cost Per Click (CPC) vs. Cost Per Acquisition (CPA)

CPM is one of several methods used to price website ads. It is generally used alongside other metrics—cost-per-click (CPC) and cost-per-acquisition (CPA)—to help marketers analyze the effectiveness of their ads.

• Cost-per-click (CPC): An advertiser pays each time a website visitor clicks on the ad. Cost-per-click is also known as pay-per-click.
• Cost-per-acquisition (CPA): An advertiser pays each time a website visitor completes a desired action, such as viewing an ad or—if the advertisement is shared on a social media platform—, following, posting, or other similar type of audience engagement.

Special Considerations

When it comes to advertising specifically on social media, there are two terms that are particularly important: impressions and views. An impression refers to the presence of an ad on a user's screen. A view refers to instances when a user engages with any digital content—for example, a video.

Rates for social media advertising tend to be higher and can vary depending on the platform.

The Bottom Line

Cost per thousand (CPM) is the average cost for achieving 1,000 advertisement impressions. It is one of the figures used to charge advertisers for digital advertisements. It is also used as a metric by companies who want to measure how successful a marketing campaign is.