There are two main pricing models for businesses to choose from for paid advertising: cost-per-click (CPC) and cost-per-impression. CPC entails paying a certain amount whenever a user clicks on an ad. Meanwhile, cost-per-impression charges a fee whenever an ad appears on a user's screen, even if the user doesn't view it. Frequently, advertisers charge rates based on cost-per-thousand-impressions (CPM) because each impression costs so little.
You can calculate CPM using the following formula: The total cost of your campaign divided by the total number of impressions divided by 1,000. Additionally, you can multiply the cost an advertiser quotes per impression by one thousand. While businesses wind up paying for ads that users may not even see using the CPM model, there are some cases when this model is ideal.
For example, businesses may want to use CPM when building brand recognition, as more people may see an ad with enough impressions. Companies may also use this model if they're confident that ads will inspire clicks from those who see them.
If you want to see CPM advertising benefits, there are certain dos and don'ts to consider when measuring cost in CPM.
Do Remember That CPM Advertising Won't Calculate Exact ROAS
Return on ad spend (ROAS) can show the revenue that a business has acquired from every dollar spent on advertising. However, CPM doesn't accurately calculate ROAS. This is because you won't be able to specify how many individual viewers saw the ad, only the number of times it appeared in front of people.
Do Target the Right Viewers at the Right Time
If ads feature a good click-through rate (CTR), try to widen your audience to see what the effect is. You may notice improved chances of better performance with broader audiences. Show viewers something of value, including offers that attract and hold their attention. You should also give viewers a specific action to take.
Do Test Your CPM Ads
Find out which of your ads are most appealing before measuring cost in CPM. You can identify top-performing ads through A/B split-testing. This entails launching two ads simultaneously with a single difference, such as an image or call to action. The choice of words and pictures can significantly affect ad performance. Some ads may be more appealing than others, whether you use an image that resonates with audiences or messaging that speaks to them more effectively.
Don't Forget to Determine Your CPM Advertising Budget
All campaigns, whether they use the CPC or CPM model, will need a specific budget. If you can determine a budget based on what you can truly spend, you'll be able to avoid spending too much on your campaigns. With that budget set, you can look for specific issues with your ads and ways to optimize them if your campaigns don't appear to yield the results you want. At the same time, you won't have to worry about significant losses if your campaigns don't perform well at the start.
Don't Associate Revenue with Impressions
CPM ads are somewhat similar to billboards. They appear in front of thousands of people, but not everyone will see them, let alone take the desired action. There's also no way to determine whether sales came from the billboard.
CPM measures cost per 1,000 impressions, which means that ads are placed for viewers to see, but what if people don't see it or respond to it? There is no way to see whether someone viewed the ad and decided to make a purchase afterward. On the other hand, they do increase brand awareness and visibility.
Don't Assume That All Viewers Will Take Action
Keep in mind that an impression doesn't mean your audience liked the ad. People may not even notice your ads, and you won't find out if the people who saw them found them appealing. In turn, CPM ads won't reveal the overall quality or effectiveness of ad campaigns. Remember, these ads are best used to increase brand awareness or extend ads that have already been proven to be successful. If you want to get your brand out there, CPM can be an excellent model to use.
Know When to Use CPM vs. CPC for Your Ads
Although CPM can help with increasing brand awareness and testing your ads, it's not as measurable as CPC and can make it more challenging to connect ads to sales. In some cases, such as branding campaigns, this model is great to use, but in other campaigns attempting to drive action, CPC may be your best bet.
If you're not sure which kind of advertising will work best for your digital marketing strategies, a media partner can be your guide. An experienced partner can help you make the right choice based on your specific business goals and the types of ads you want to run.