What Is CPM for Publishers?

The CPM pricing model is a firm favorite among digital publishers, with good reason. The model is easy to use and requires relatively low levels of effort from web site owners to convert traffic into revenue.

The increasing number of internet users has made digital marketing vital to any business’ growth strategy. As of April 2023, there were 5.18 billion internet users worldwide — almost two thirds of the global population — with that figure growing at 4% per annum.

It is, therefore, hardly surprising that the global digital advertising market is projected to hit $786 billion by 2026. 

Cost per mille (CPM) is one of the most popular models for pricing web ads, helping brands reach new audiences while requiring very little from publishers. Under CPM advertisers pay publishers, website owners or video monetization platforms for every 1,000 impressions a display ad receives.

Keep reading to understand what a CPM marketing campaign is, its different aspects and what advertisers expect from successful ad campaigns.      

What Is CPM?

Cost per mille (CPM), or cost per thousand, refers to the amount an advertiser pays for every 1,000 ad impressions their ad receives.

With CPM marketing, advertisers can attract the attention of a large target audience through a single display ad. This is why the CPM pricing method suits companies looking to create brand awareness or increase brand recognition.

How to Calculate CPM 

CPM is calculated by dividing the total ad spend by impressions and multiplying by 1,000. This allows marketers to determine the total ad spend for every 1,000 impressions.

For example, displaying ads on a website that charges a CPM rate of $5, a marketer has to set a budget of $50 for 10,000 impressions.  

How Does CPM Work?

Advertisers pay for every 1,000 impressions their ads receive. For example, if an advertiser agrees to a CPM rate of $2, they’ll pay $2 for every 1,000 views their ad attracts.  

Publishers and advertisers can either directly negotiate over a CPM rate or conclude deals via ad networks or ad exchanges that facilitate CPM advertising. They can also choose to buy and sell ad space using the CPM model through programmatic advertising.

Google Display Network (GDN), for example, counts an impression as each time an ad appears on a Google search engine results page (SERP) or on one of the websites it serves. The ad network’s viewable CPM bid strategy, however, only requires advertisers to pay for impressions that are measured as viewable.

GDN has different metrics for what counts as a viewable ad. For example, display ads generally count as a viewable ad when at least 50% of the ad’s area appears on screen for at least a second. For larger ads — more than 242,500 pixels — that percentage drops to 30%. Video ads are similar to general display ads, requiring at least 50% of its area to be visible, but video ads must also play for at least 2 seconds.

Microsoft Audience Network also counts an impression when 50% of the ad appears on screen for a second or more. Facebook, on the other hand, counts an impression when an ad simply enters the view screen. These platforms allow advertisers to set up CPM as a bid strategy when they are setting up a new campaign.     

Publishers earn revenue each time a CPM ad displayed on their webpage is viewed by a visitor. This pricing model doesn’t require any action on their behalf, so the earning is not affected by a lack of visitor interaction with the ads.

Publift, Epom, Vuukle, AdSense and Ezoic are just some of the best ad networks for publishers that use CPM pricing.

CPM vs. Other Marketing Metrics

CPM is not the only marketing metric available in online advertising. Advertisers can choose from multiple pricing methods such as cost per click (CPC), cost per acquisition (CPA), cost per install (CPI) and cost per view (CPV). 

Let’s take a closer look at each:

• CPC: Under the CPC model advertisers pay for each click an ad receives. It’s calculated by dividing the total cost of clicks by the total number of clicks. Unlike CPM, which is impression-based, CPC is action-based and generally costs more.

Both advertisers and publishers can measure an ad’s effectiveness through click-through rate (CTR), which is the percentage of visitors who click on the ad after viewing it. CPC is the right fit for businesses that want to gain new leads.         

• CPA: CPA is also action based, advertisers can determine how much it costs to acquire a new customer. It is calculated by total ad spend divided by the total number of acquisitions (conversions).

CPA bests suits brands that want to increase their sales or subscriber count. Because there’s no guaranteed income for publishers, they can charge a much higher rate for a CPA advertising campaign.

• CPI: This model is mainly used in marketing campaigns focusing on mobile user acquisition, with advertisers paying for every user that installs their app. CPI is calculated by dividing total ad spend over a specific time frame by the number of new installs during that same period. CPI is quite similar to CPA, as companies pay only when their app is installed on a device. 

• CPV: CPV is used to calculate the cost of video ads in online advertising. It is calculated by dividing the total ad spend by the number of video views. Advertisers are billed every time their video is watched. Unlike CPM, which indicates the cost of an ad for every 1,000 impressions, CPV measures the cost for every view of a video ad. 

What Is an Average CPM?

Various factors can affect the average CPM campaign, such as industry, target audience, ad format and ad placement, as well as current market trends and the ad network or platform in question.

For example, the Microsoft Audience Network claims its average CPM is $2-6. While there are no official estimates for GDN, some third-party estimates suggest that display campaigns average $0.50-4. Third-party analytics suggest the average Facebook CPM for in 2022 was $12.05 and was $10.53 for Instagram.

Audience location also influences CPM. According to 2021 data, the highest Facebook CPM was the US at $35, while the lowest was Pakistan at $1. For Google, audiences from countries such as the US, Canada, Germany, Switzerland, and the UK generate higher CPMs. 

Industry also influences average CPM significantly. Real estate, legal services, retail and eCommerce, health and technology are some of the most competitive verticals in digital marketing. Advertisers targeting customers in these segments will pay a higher price for every 1,000 impressions. 

Publishers, however, shouldn’t expect average CPM rates to remain static. For example, in November and December, as businesses spend more on online advertising, the average CPM rises – to the publisher’s benefit. But, on the flipside, there is a huge drop in CPM campaigns in January as companies cut back on their digital marketing spend.

How Publishers Can Increase CPM Rates

A number of factors influence CPM rates, including audience size, ad placement, the density of ads, geolocation and web content. Here are some suggestions on how publishers can boost their CPM rate.  

1. Check Ad Code Integrity

Publishers might choose to migrate their sites for a number of reasons, but following such an update it’s essential to check whether any ad units are broken. Update all ad codes to make sure that ads can still be delivered.

2. Proper Ad Placements

CPM ads have to appear in the right place to have the highest impact. The front, bottom and sides – both left and right – of a web page are its most visible areas. If the website is rich in content, ads should be placed close to relevant content. But avoid placing ads close to interactive elements such as navigation tabs/buttons, links and menus.        

3. Optimize Ads for Mobile Web

More than 50% of global web traffic comes from mobile devices, meaning it’s essential to optimize display ads for mobile browsers. The best performing ad formats, according to Google, can be used for both desktop and mobile.

For example, the 300×250 (medium rectangle), 336×280 (large rectangle), 728×90 (leaderboard) and 160×600 (wide skyscraper) tend to be the top-performing ad sizes.

4. Reduce Ad Density

Avoid having too many ads close to one another, Google advises that no more than 30% of a web page’s vertical real estate be taken up by ads. Mix up ad formats and don’t overpopulate a page with similar ads.    

5. Improve UX

Visitors land on a site because of its content, not its ads. This means that considerations such as a site’s content quality, user friendliness and page load times should come before the publisher’s ad strategy.  

6. Reduce Bounce Rate

Make content interesting and relevant to increase engagement rate and reduce bounce rate. Quality content not only attracts more traffic to a website but also ensures that visitors stay on the site for longer, exploring more pages and seeing more ads.    

Final Thoughts

Publishers have a vested interest in understanding what CPM is, allowing them to get the most out of digital advertising.

CPM is one of the most popular pricing models because it’s as appealing to publishers as it is to advertisers. The model’s focus on impressions (views), not clicks or acquisitions, means publishers don’t have to overthink their ad strategy beyond inventory placement. Advertisers, meanwhile, gain the advantage of reach and brand recognition.

With that said, choosing the right ad network remains a crucial decision for publishers looking to maximize their revenue potential.   

FAQs

What Factors Affect CPM Rates?

CPM rates aren’t constant, with many factors affecting them. One is supply and demand. CPM rates increase when many advertisers want their ads to appear on the same website, forcing them to pay more to beat the competition. Other factors include audience location, market conditions, seasonality and ad format.