Date First Published: 17th September 2022
Topic: Web Design & Development
Subtopic: Web Advertising
Article Type: Computer Terms & Definitions
Difficulty: MediumDifficulty Level: 6/10
Learn more about what CPM is in this article.
Stands for cost per mille. CPM represents the amount of money an advertiser has to pay a publisher every 1000 impressions, which means every time one of their ads is successfully displayed to a unique visitor 1000 times on a webpage. 'Mille' is a Latin word for one thousand and it is not to be confused with 'mile'. CPM is similar to RPM (Revenue Per Mille), which is how much a publisher will earn every 1000 impressions, but instead of measuring the revenue per 1000 impressions, CPM measures the advertiser's costs. It could be a banner ad, popup ad, interstitial ad, or any other type. Advertisers can place a bid on their ads depending on what they are advertising. For example, if an advertiser places a bid to pay up to £4.00 CPM, it means that the advertiser will pay up to £4.00 for every one thousand impressions. Once the advertiser's budget has been reached, their ads are automatically removed from the publisher's website for the rest of the billing period. The CPM costs no more than advertisers are willing to pay through a bidding system.
CPM can be calculated using this formula:
Total cost ÷ Total impressions x 1000
For example, if an advertiser spent £15.00 on advertising by clicks and the ad has 6000 unique ad impressions per day, it would be calculated by this method:
£15.00 ÷ 6,000 x 1000 = £2.50 CPM
If a page CPM is £4.00 and a website gets 4,000 unique impressions per day, the daily advertising costs would be calculated by this method:
£4.00 x 4 = £16.00 daily advertising costs
Some people confuse CPM with eCPM. The difference between eCPM and CPM is that eCPM is a publisher's measurement and CPM is an advertiser's measurement. eCPM gives a measure of how much money publishers make from ads, whilst CPM gives a measure of how much advertisers will be charged for their ads. eCPM is the same as RPM as it calculates the effectiveness per one thousand impressions. The higher the eCPM, the more advertising revenue they will make. eCPM is a misleading term as it does not cost publishers money to display advertiser's ads on their websites. It is much more accurate to say 'RPM' or 'Revenue per thousand' on the publisher's side.
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