The cost per mille (CPM) is a key figure that indicates the amount of money that must be spent on an advertising campaign in order to reach 1000 people in a target group.
What is CPM?
The term originally comes from print, TV and radio advertising, and it has also been used in online marketing since the beginning of the commercial internet. It measures the price that an advertiser has to pay in order to reach 1,000 people in a certain target group.
How to calculate the CPM?
The formula from which the cost per mille price is derived is as follows:
CPM = “How much was paid” / “How many visitors saw the advertisement” * 1000.
To determine the reach, both gross and net reach are included in the calculation of the CPM.
Of course, the calculation can also be rearranged so that if the CPM is fixed and the number of visitors is expected, the costs can be calculated:
“How much to pay” = (CPM * “How many visitors are expected to see the ad”) / 1000.
Advantages of the CPM billing principle
CPM offers a standardised representation of the price. This allows an advertiser to compare the advertising costs of different portals, sites and platforms.
Disadvantages of the CPM billing principle
Only the number of impressions is taken into account in the calculation, i.e. whenever a page is loaded. This says nothing about whether a visual contact was actually made or whether the user noticed the advertisement. This can lead to wasted ad spend.