COST PER THOUSAND

IMPRESSIONS (CPM)
CASE STUDY: SNAPCHAT
A BRIEF BREAKDOWN
Relevant terms: Cost per thousand impressions (CPM):

● REACH: measures how many individuals are ● CPM is a marketing metric used to
exposed to the advertisement measure and compare the monetary
● FREQUENCY: measures how many times an cost of varying media types and media
individual is exposed to the advertisement vehicles.

● IMPRESSIONS: measures an individual’s ● It is useful to help marketers

opportunity to see the advertisement determine the most cost-efficient
○ Impressions = Reach x Average Frequency
media investments and maximise
● MEDIA TYPE: the ad-carrying medium impressions.
● MEDIA VEHICLE: the ad-carrying ● In order to measure CPM, you need to
program/platform/program within the know the advertising media cost and
medium
the impressions generated.

(Farris et al, 2016)

 Advertising media cost ($)
CPM ($) = Impressions generated (# in thousands)

Advertising media cost:

refers to how much the media vehicle charges per advertisement insertion.

Impressions generated (# in thousands):

refers to how many opportunities the advertisement has to be seen if it is
inserted into the media vehicle.

(Farris et al, 2016)

Mini Case Study: Measuring CPM of new media vehicles
Snapchat is a relatively new media type in that it offers a
range of unique advertising vehicles which are priced upon
a number of variables – including day of the week inserted,
location, geographical coverage, target demographic and
length of time.

Because of these variables, advertising media cost is set by

the buyer through a self-assigned daily budget (the
maximum amount you will spend per day) and a CPM bid
(which competes in an auction with other advertisers).

So how can we use CPM to measure and compare these

vehicles when the Advertising Media Cost and Impressions
Generated are self-assigned and retrospective?

SNAPCHAT Can we accurately assess which Snapchat vehicle is the

most cost-efficient through CPM?
(Wallaroo Media, 2017; Snapchat, 2017 )
THE VEHICLES
Snapchat offers three vehicles:

1. Snap Ads

2. Filters

3. Lenses

(Snapchat, 2017)
THE METHOD
Snapchat tells us: How we plan to determine the
average CPM:
● Advertising is priced retrospectively based on target
age, location, device type and advanced demographics of ● Analyse impressions data
your ad, as well as the bidding price of other from Snapchat ‘Success
advertisers. Stories’.

● The impressions of their successful advertising stories ● Compare this data with
are available here: third-party cost/pricing
https://forbusiness.snapchat.com/success-stories/ estimates collected from
industry reports and news
● Snap Ads that are placed on Discover cost $50,000 per reports.
day
● Calculate the average CPM
● Geofilters cost a minimum of $5 for the Snap Ads Success
● Lenses cost $450,000 per day Sunday through to Stories from available data.
Thursday, $500,000 for Friday and Saturday, $800,000
for holidays and special events
(Snapchat, 2017; Wallaroo Media, 2017)
 (Snapchat Anheuser Busch, 2017; Snapchat Gatorade, 2017a;
Snapchat Courtyard Marriott, 2017; Sebastian, 2015)

1. Snap Ads

Advertising Media Cost Impressions generated

Client name CPM
(Client Spend) (in the thousand)

Anheuser Busch $225,0001 27,0002 $8.33

Gatorade $150,0003 28,000 $5.36

Courtyard Marriott $225,0004 14,000 $16.07

Average: $9.92
Problems:
● There is very limited information about how much clients spend on their Snap Ads, therefore all
figures for Client Spend are estimates
● It has been identified that the CPM for Snap Ads is rapidly decreasing each year since the
vehicle’s introduction in 2015, where the estimated CPM was $20 (Sebastian, 2015). This will
impacts the average.
 (Snapchat Ad Council, 2017; Snapchat Cartier 2017; Snapchat Coca-Cola, 2017;
Snapchat Jameson Irish Whiskey, 2017, Wallaroo, 2017)

2. Filters
Advertising Media Cost Impressions generated
Client name CPM
(Client Spend) (in the thousand)

Ad Council 90,000 210,000 $0.43

Cartier 160,000 143,000 $1.12

Coca-Cola 160,000 70,000 $2.29

Jameson Irish Whiskey 160,000 42,000 $3.81

Average: $1.91

Problems:
● There is very limited information about how much clients spend on Filters, however Wallaroo
Media estimates it to be one-fifth of the cost of Sponsored Lenses. Therefore, the Client Spend
figures are estimated based on the day they were published.
 (Snapchat Cadbury, 2017; Stewart, 2016; Snapchat Gatorade, 2017b; Snapchat
Warner Bros., 2017; Snapchat Taco Bell, 2017, Wallaroo, 2017)

3. Lenses
Advertising Media Cost Impressions generated
Client name CPM
(Client Spend) (in the thousand)

Cadbury 450,000 14,000 $32.14

Gatorade 800,000 165,000 $4.84

Warner Bros. 800,000 62,000 $12.90

Taco Bell 800,000 224,000 $3.57

Average: $13.36
Problems:
● While Snapchat has released information about the rates for 24-hour Sponsored Lenses, there is
no information about the geography limitations of these rates. Most ‘Success Stories’ ran across
many regions, therefore it is highly possible the Client Spend was also higher than estimated.
 From this small sample size of

COMPARISON
Snapchat ‘Success Stories’ and
rough estimates of their
Advertising Media Cost, it can be
Vehicle Average CPM concluded that the most
Snap Ad $9.92 cost-efficient advertising vehicle
on Snapchat according to the CPM
Filter $1.91
are the Filters.
Lens $13.36
 PROBLEMS AND LIMITATIONS OF CPM
As this case clearly demonstrates, there are some major limitations of using CPM to determine
the most cost-efficient media vehicle.

1. CPM is very difficult to calculate prospectively, 3. CPM does not take into consideration other
since the exact number of impressions measurements of ad effectiveness such as
generated can only be determined likelihood to convert into sales, brand
retrospectively. resonance or positive brand association.
Therefore it shouldn’t be used solely to
2. While previously it was easier to predict the
determine the most cost-efficient vehicle.
number of impressions a media type or vehicle
can provide the advertisement (based on For example, with the case of Snapchat,
viewership or subscription numbers, for while Filters proved to have the lowest
example), it becomes very difficult to predict CPM, Snap Ads are more effective at
this number in digital media because number converting impressions to sales.
of users doesn’t equal impressions.
PROBLEMS AND LIMITATIONS OF CPM
4. In the digital advertising pricing framework that has been adopted by most social media
platforms (Facebook, Instagram, Snapchat), the Advertising Media Cost is set by the client
through a bidding logic that purports the more you spend, the more impressions you will be
given.

However as the case demonstrates, this is not necessarily true because the very nature of
social media means there is opportunity for organic impressions (user seeks out
advertisement due to entertainment value, or user likes/shares the advertisement amongst
the platform and across other platforms) to significantly alters an ad’s opportunity to be
seen. This silent addition to the CPM equation means the number of impressions becomes
even more difficult to predict and measure.

In the modern era of advertising, it is worth questioning how effective CPM is in helping
advertisers determine the most cost-efficient media investments to maximise impressions.
FOOTNOTES
1. This Snap Ad was placed during the 2017 Super Bowl. Moses
(2016) reports that Snapchat required a minimum spend of
$225,000 for Snap Ads during the Super Bowl. We estimate in
2017, it would be at least the same.

2. Snapchat has roughly 68 million North American daily users

(Lynley, 2017) and an estimated 40-60% will see a Snapchat ad
(Fontein, 2016), therefore this number was estimated at 40% of 68
million potential impressions.

3. This Snap Ad was placed in the ESPN Discover Edition over a

three-day takeover, which is at a current rate of $50,000 per day
(Wallaroo, 2017).

4. This Snap Ad was placed during the 2016 Super Bowl. Moses
(2016) reports that Snapchat required a minimum spend of
$225,000 for Snap Ads during the Super Bowl.
SOURCES: Sebastian, M, 2015. ‘Snapchat to charge advertisers two
cents per view on discover’. AdAge. Published 7 May
<http://adage.com/article/special_report_newfronts/snap
chat-charge-advertisers-cents-a-view-discover/298514/>
Farris, P., Bendle, N., Pfeifer, P. E., & Reibstein, D. J.,
2016. Marketing metrics: The manager's guide to Snapchat, 2017. ‘Ad Products’. For Business
measuring marketing performance (3rd ed.). Upper Snapchat.<https://forbusiness.snapchat.com/ad-product
Saddle River, NJ: Pearson. s>

Fontein, D, 2016. ‘The Top Snapchat Statistics You Snapchat Ad Council, 2017.
Need to Know for Business’. Hootsuite. Published 14 <https://storage.googleapis.com/snapchat-web/success-
December stories/pdf/pdf_adcouncil_en.pdf>
<https://blog.hootsuite.com/snapchat-statistics-for-busin
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<https://storage.googleapis.com/snapchat-web/success-
Lynley, M, 2017. ‘Snap has finally filed publicly for its stories/pdf/pdf_anheuserBuschInBev_en.pdf>
passive IPO’. TechnCrunch. Published 2 February
<https://techcrunch.com/2017/02/02/snap-has-finally-file Snapchat Cadbury, 2017.
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stories/pdf/pdf_cadbury_uk_en.pdf>
Moses, L, 2016. ‘Snap to unlock budgets: Inside
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<https://digiday.com/media/snapchat-pitch-deck-theyre- stories/pdf/pdf_cartier_mena_en.pdf>
positioning-storytelling-platform/>
SOURCES:
Snapchat Coca-Cola, 2017. Snapchat Taco Bell, 2017.
<https://storage.googleapis.com/snapchat-web/success- <https://storage.googleapis.com/snapchat-web/success-
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Snapchat Courtyard Marriott, 2017. Snapchat Warner Bros., 2017.

<https://storage.googleapis.com/snapchat-web/success- <https://storage.googleapis.com/snapchat-web/success-
stories/pdf/pdf_courtyard_marriott_en.pdf> stories/pdf/pdf_suicide_squad_en.pdf>

Snapchat Gatorade, 2017a. Stewart, R, 2016. ‘Cadburry eggs on fans to celebrate

<https://storage.googleapis.com/snapchat-web/success- Easter with Snapchat Sponsored Lens’. The Drum.
stories/pdf/pdf_gatorade_snapads_en.pdf> Published 11 March
<http://www.thedrum.com/news/2016/03/11/cadbury-egg
Snapchat Gatorade, 2017b. s-fans-celebrate-easter-snapchat-sponsored-lens>
<https://storage.googleapis.com/snapchat-web/success-
stories/pdf/pdf_gatorade_lens_en.pdf> Wallaroo, 2017. ‘Snapchat Advertising Costs – A
Breakdown of Each Offering’. Wallaroo Media. Last
Snapchat Jameson Irish Whiskey, 2017. updated 1 June
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