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The term CPM comes from the English expression "Cost Per mille" What does it mean Cost Per Thousand Impressions, also known as CPT (Cost Per Thousand) Y TAI (Thousand Ad Impressions). It is a fundamental formula for calculating advertising costs in print, online, television and radio. For example, the prices of Google AdWords or Blind Network ads are usually set based on the formula CPM. CPM determines how much advertisers must pay to get 1,000 visits through the ad or banner.

Calculation

The type of contact established between users and the ad, and the total number of users serve as the basis for calculating the CPM. The type of user contact with the ad varies depending on the means of communication used:

  • TV: eye contact measured by program range
  • Radio: hearing contact measured by program range
  • Printing: visual contact measured by the flow range of the material
  • On-line: equals the number of impressions or visits

In addition, the net range can be calculated. In this way:

  • Range "gross": the total number of "Contacts". For example, a radio program can be listened to by several people in an office, a magazine can be read by many patients in the doctor's waiting room.
  • Net range: for this value it is assumed that only one person can perceive the ad. A clear example is that of the unique visits of a web portal.

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Formula

CPM = (ad costs x 1,000) / gross rank

Example

A web portal receives 1,000,000 visits per month and the monthly costs of the commercial promotion add up to € 10,000. In this way:

CPM = ((Advertising costs) / (gross range)) x 1,000 = (€ 10,000 / 1,000,000) x 1,000 = € 10

The CPM of this ad is € 10. In this way, the calculation of advertising costs is calculated as follows:

Advertising costs = (€ 10 x 1,000,000) / 1,000 = € 10,000

An advertiser who aims to obtain 1,000,000 page impressions, visits, with his banner must invest € 10,000 in an advertising campaign with a CPM from € 10.

Apart from the range (Eg visits, impressions, readings, etc.) the CPM It also depends on where the ad is placed and what type it is: a banner is much cheaper than a wall. It should also be considered if the ad is fixed or if it is rotating with other ads, which at the same time could be from a competitor.

According to the advertising portal "11freunde", the CPM of a banner varies between € 25 and € 120.

Benefits of CPM

With the help of CPM, advertising costs can be accounted for in a clear and simple way. At the same time, the advertising costs of different media can be compared much more easily. For example: with the help of CPM, advertisers can choose whether it is worth increasing or decreasing the budget for advertising campaigns on the radio, in print, on TV or on the Internet.

Disadvantages of CPM

You cannot examine the quality of the visit of a banner since the CPM is a purely quantitative indicator. It is very important in online commercial promotion to determine if the CPM it is calculated based on the number of visits to a web portal, impressions or unique visits. For this reason, it is recommended to carry out surveys and market analysis to be able to identify the quality of the visits that an advertisement has received.