CPM and its meaning in online advertising
What is CPM?
CPM is the abbreviation of Cost Per Mille (mille: Latin word, means 1000) or also known as Cost Per Thousand, that is a way to find out what is the price of an online advertisement and how effective an online ad is. CPM shows that how much money a company pays for a particular ad unit per 1000 impressions (for example, the ads on this site in the HubPages Earnings Program are based on this method, too).
So meanwhile with PPC (Pay Per Click) and CTR (Click Through Rate) rates we can define an ad campaign that only pays for those ads, which have been clicked and/or viewed by the visitors of the site; with this method advertisers pay for every impression (appearance) of the given ad. As you may already think, this is not the cheapest advertising method, but is still loved by many companies.
Why do companies use this CPM method?
The reason for this is the fact that with this campaign a company can rather concentrate on increasing brand presence and the brand-awareness of the consumers instead of driving more and more traffic/visitors to their sites. The message of the company is delivered through these ads, so they don’t necessarily need the consumer to actually click on the ad and visit their site.
One drawback can appear though: without the company being able to set a frequency cap (the number of appearance of the ad for the same person), in theory one person is able to see the same ad several times while the campaign is running. So all in all, the company can end up paying a lot without reaching more than a few customers.
How can you calculate CPM?
CPM can be calculated in a very easy way: divide the total advertising cost by the # of impressions , and then multiply this number by 1000 .
The CPM is always given in a currency (based on the company’s preferences).
An example of CPM
- The total advertising cost of one ad at a company was $10,000.
- The number of clicks made during this campaign on the ad is 3,000,000.
- Based on the description: CPM = (Total cost / # of impressions) x 1000.
- So in this case: CPM = (10,000 / 3,000,000) x 1000 --> 3,33
We can see that during this campaign the company paid $3,33 per 1000 impressions for the advertisement to appear on different sites.
What can affect CPM?
The cost of CPM depends on the keywords and the placement of the ad. So the better the place and the higher the competition for the keywords is, the more a company has to pay for their campaign.
CPM on HubPages
I guess you have already noticed, the CPM on the Earnings page here, in HubPages tend to fluctuate from day to day. The reason for this is we all have many hubs on the site and most of these hubs are not around one niche. The number of visitors who read the articles and the CPM is also different for each hub, therefore the average CPM for one day will barely be the same twice. The more competitive topics you write about and the more competitive keywords you use, the higher your CPM will be.
If you are lucky enough to find and write about a topic that is very popular yet barely has any competition on the internet, then you will get loads of impressions, but for a relatively low CPM. On the other hand when you write about a very competitive topic and you still manage to get many impressions, then your CPM will be high.
Additionally, please keep in mind a higher number of impressions does not necessarily result in higher earnings, as CPM has the biggest impact on this amount.
For example here are my data from June, 2012 for 3 days:
Recommended for further reading:
As you can see, on Saturday and Sunday I made the same amount of (enormous, isn’t it?) money, although the number of impressions were different. While on Monday, with only 7 impressions (so exactly the average of the previous two days) I have doubled my earnings.
Although I can’t be 100% sure, I think this was caused by the fact that meanwhile on the weekend people have read my general articles about travelling, on Monday my hubs that have more competitive (so expensive keywords) content were more popular.
Share your ideas!
Please feel free to comment on this hub, your feedback is very much appreciated!
Or, if you feel that you can write fresh, new ideas about this or a similar topic, just join our community and start writing!
© Copyright 2012-2014, Zsofia Koszegi-Nagy (zsobig)
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© 2012 Sophie
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