What is CPM in advertising and how does it work?

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Key takeaways

1. CPM is a popular strategy used by businesses to boost online visibility, web traffic, and potentially more sales.
2. CPM stands for Cost per Mille which translates to cost per thousand impressions.
3. In this article we delve into CPM campaigns in great detail, explaining how CPM campaigns could work for your business or website.
4. Read on to also understand CPA and CPC campaigns, and the different models of CPM.
5. We also share a step-by-step CPM strategy to help you carry out successful campaigns.

What is CPM in advertising and how does it work?

1. CPM stands for Cost per Mille which translates to cost per thousand impressions.
2. Impressions refer to the number of times an ad is displayed to a single user.
3. Users are usually identified by their IP address, which is a code unique to a single device, e.g. Computer or phone.

Also read: What is web banner advertising and how does it work? – all you need to know

CPM example:

1. For example, if you see a rate indicated as $1.5 CPM, this means you will pay $1.5 every time your ad is displayed 1,000 times to a single person.
2. As a rule, online ads have a frequency cap that limits the impressions (number of times the ad is shown to a user).
3. CPM is a common pricing strategy used in the following online marketing methods: 
   1. 1. Display ads (web banners)
      2. Facebook ads
      3. Twitter (X) ads
      4. Instagram ads
      5. Tiktok ads
      6. Spotify ads
      7. Snapchat ads

What is a CPM campaign?

A CPM campaign is a process that involves promoting goods or services through ads paid per 1,000 impressions, running through a specified period.

What is the difference between CPM, CPA, and CPC campaigns?

1. While CPM refers to the cost per 1,000 views, CPC refers to the cost per click.
2. In CPC you only pay when someone clicks on your ad.
3. CPA is a form of performance-based marketing where an advertiser only pays after certain objectives, targets/results are met.
4. These results could be a certain number of clicks, subscriptions, sales, registrations, etc.

CPM, CPA, and CPC campaigns: Which is better?

1. CPA and CPC are increasingly becoming the favored options over CPM because they focus on specific actions by users.
2. In CPA and CPC, advertisers only pay after specific results have been achieved such as:
   1. 1. A certain number of clicks
      2. An agreed level of engagement- number of likes, comments.
      3. A set number of registrations, subscriptions, etc.
3. For CPM, you pay whether people click on your ads or not.

How do I calculate CPM? (CPM Formula)

1. You can calculate CPM by dividing your cost/budget for the campaign by the number of impressions you want.
2. The result is then multiplied by 1000.
3. For example, if you want to invest USD 20,000 in your campaign and want 250,000 impressions:

20,000/250,000*1000. Your CPM will be USD 80.

CPM Campaign strategy

A CPM Campaign strategy involves using the best practices for display Ads to ensure maximum reach and conversion.

You can run a successful CPM campaign following this simple guide:

1. Identify your target audience by studying the persona of your customers and what online platforms they frequent.
2. Design campaign ads that stand out; with a clear message and call to action, as well as visually appealing.
3. Create good landing pages that are easy to navigate, with value-based calls to action, and mobile-friendly.
4. This helps to get as many users on board as possible.
5. Ensure your ads mirror the tone and feel of your websites and landing pages.
6. Test your web banners through the A/B testing method.
7. A/B testing helps you identify, improve, and serve the most effective ads to your target audience.

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Audience persona – Identifying your correct audience for CPM campaigns

1. Audience persona refers to the detailed characterization of the people that you want your marketing campaigns to reach.
2. Also known as marketing personas or customer personas, they are clear descriptions that are formed through available data on targeted clients.
3. It is important to describe and make some notes about the person who is likely to be interested in your product or business.

An effective audience persona contains the following details:

1. Give your customers a single befitting name.
2. Record demographic details such as age, sex, location, education level, etc.
3. Record their behavioral characteristics as well as their interests
4. With the above information, you can even draw/create a face for the customer.

The above details are important in understanding the challenges, pleasure, and satisfaction points of your customers.

This information can be used to identify customers’ patterns and the thinking behind what they buy.

Creating an audience persona makes it easier to reach out to potential customers with a personal touch.

Run CPM campaigns on high-authority sites

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Getting high-authority sites with good metrics is key to the success of your CPM campaign.

The following metrics are the most desirable and most sought-after by brands and businesses.

1. High traffic. This guarantees you a good number of clicks on your ad by online users.
2. High DA sites (between 70 and 100). This enhances more visibility of your banners from search engine result pages.
3. High DR (between 70 and 100). Use websites that rank higher with a good backlink profile for more visibility.
4. High click-through rate. Websites that rank well in the above metrics can give you a good click-through rate.

Also read: What is link insertion and why is it important for SEO?

What is the Clickthrough Rate in CPM campaigns?

1. Clickthrough Rate (CTR) is an important metric that measures how often people click on a website ad.
2. CTR is calculated by dividing the number of clicks your Ad received by the number of times your ad was shown/viewed.
3. The result should then be multiplied by 100 to get a percentage.
4. Impressions refer to the number of times your banner is displayed to a single user, no matter if the user clicks or not.
5. It is important to keep track of the number of people clicking on your ad from the impressions you pay for.
6. This will tell you whether your campaign is doing well and what aspects you need to review.

Google Display Network for CPM Campaigns

1. The Google Display Network refers to a group of over 2 million websites and Apps where your web banner ads can appear.
2. The display network allows you to reach millions of people worldwide without relying on the Search Engine Results Page (SERP) ranking.
3. You can set up your Google Display Campaign through these easy steps:
   1. 1. Create a new campaign under the Google Ads platform and select your campaign goal.
      2. Set the language and places where you want your banner ad to appear. You can also select how many times your Ad will be shown to the same user.
      3. Set your budget. The budget determines how often your ads are featured as well as prominence.
      4. In choosing your targeting strategy, you can let Google identify the best audience segments or add targeting information/signals of your own.
      5. Create effective ads to run on the Google Display Network.
      6. Google allows you to add relevant materials like pictures, logos, descriptions, or videos.
      7. Its AI tool will generate the most appropriate ad using the material you provided.
      8. The final step includes Add to Group, and clicking Next to finalize and kick start your Google Display campaign.

CPM advertising rates

1. The average CPM for Google Display Network is $3
2. The average CPM for Facebook ads is $1-3
3. The average CPM for web banner ads is $0.25 – 2.
4. The average CPM for Instagram is $7

CPM campaign models

CPM campaigns can be executed in different fashions depending on the desired result.

Types of CPM Campaigns include;

1. eCPM
2. vCPM
3. CPVC

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What is vCPM and how does it work?

1. vCPM is a model that focuses on the actual views of a given ad.
2. CPM is where an advertiser pays for impressions (the number of times an ad is displayed) regardless of whether it was viewed or not.
3. In vCPM, payment is done after a user scrolls to the actual advert and views it.
4. In vCPM, a view is defined as a screen appearance of at least 50% of the ad content for 1 or more seconds.
5. vCPM gives assurance to an advertiser or brand that they are getting value for money invested in the campaign.

What is eCPM and how does it work?

1. eCPM is a similar model to CPC (cost per click).
2. For an eCPM campaign, an advertiser only pays after specific revenue-generating actions are achieved.
3. This is primarily based on the number of clicks on a given ad.

What is CPVC in digital marketing and how does it work?

1. CPVC refers to the cost per completed view and it is a CPM model usually used for videos.
2. Social media platforms like YouTube, Instagram, and Facebook run video adverts based on this model.
3. An advertiser is able to select timeframes, for example, 5 seconds.
4. The timeframes are used to determine a complete viewing milestone which is then paid for.

Also read: What are sponsored posts and how do they work for business?

Advantages of CPM campaigns

Here is why you should consider running CPM campaigns for your business:

1. CPM campaigns are effective in getting the attention of web visitors which increases brand awareness.
2. CPM campaigns also help understand the target audience and potential clients. You can easily identify which websites give the highest engagement.
3. Banners lead to faster conversion rates which translate into more sales.
4. Clickable banner ads generate more traffic and exponentially grow your website.

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To sum up, CPM is a popular strategy used by businesses to boost online visibility and web traffic.

As an advertiser, you have to be clear on what you want to achieve from a campaign.

This not only leads you to the right CPM model but also to the right website/platform.

Getting your CPM platform right is the most important step towards a successful campaign.