The acronym CPM refers to the cost it takes for a company’s advertisement to get 1,000 impressions on a site. This stems from the word “mille” meaning 1,000 in Latin.
Medium created the graphic below to show how to properly calculate CPM.
This means it costs that much for your ad to be placed on 1,000 users’ screens.
Advertisers may choose to use CPM instead of other performance based metric like PPC (Pay Per Click). This is because CPM:
- Has predictable pricing
- Is easy to implement
- Has low costs (even if it generates a high click-through rate)
- Emphasizes brand awareness rather than performance
When advertisers choose to use the CPM pricing strategy, they are guaranteed that number of impressions for a flat rate. This is especially important for campaigns on a budget.