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CPM and its meaning in online advertising

Updated on November 29, 2016
The price of different methods
The price of different methods | Source

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.

Calculate your CPM revenues!
Calculate your CPM revenues! | Source

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

  1. The total advertising cost of one ad at a company was $10,000.
  2. The number of clicks made during this campaign on the ad is 3,000,000.
  3. Based on the description: CPM = (Total cost / # of impressions) x 1000.
  4. 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:

HubPages earnings, June, 2012.
HubPages earnings, June, 2012. | Source

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)

© 2012 Sophie

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    • chelseafrasure profile image

      Chelsea Frasure 20 months ago from Idaho

      This really helped me understand all those numbers. Thanks!

    • Jason Mcnutt profile image

      Jason McNutt 2 years ago from Box Elder, South Dakota

      Very useful information, thank you.

    • zsobig profile image
      Author

      Sophie 3 years ago from United Kingdom

      Thank you for commenting - I appreciate it a lot!

    • keywc58 profile image

      keywc58 3 years ago

      Thanks for the information. It really helped a lot.

    • MelonieGilchrist profile image

      Gamrgurl 4 years ago

      Fantastic information!

    • zsobig profile image
      Author

      Sophie 4 years ago from United Kingdom

      @baja2013: Yes, as you can see, basically everything can have an impact on CMP.

      My hubs' CPMs mostly depend on the content and the day of the week as well - for example I see a relatively large drop in the readers number around Friday, but it jumps back to normal by Monday. I guess this only shows that on the weekends people tend to surf hubs less, meanwhile they spend a lot of time around on the weekdays. Additionally, summer seems to be another interesting season, when the upper mentioned data seems to work vica versa: so more ppl visit on weekends and less on weekdays.

    • baja2013 profile image

      Bajazid 4 years ago from Sarajevo, Bosnia

      Good to know. I just started and have 3 hubs. Noticed that my hub about mobile phones had 3 times bigger CPM. So could it be possible CPM is affected by content of hub or by the issue time (weekend or working days)? Thanks, anyway great hub!

    • Taleb80 profile image

      Taleb AlDris 4 years ago

      Thank you for this simple description, I think it is not easy task to keep CPM high.

      Voted Useful.

    • ivanmarginal profile image

      ivanmarginal 4 years ago from Jakarta

      this hub enlightens me. thanks.

    • Mama Kim 8 profile image

      Sasha Kim 5 years ago

      Thank you for this useful, interesting and well explained hub! Voted a bunch and shared!

    • zsobig profile image
      Author

      Sophie 5 years ago from United Kingdom

      Thank you very-very much, Carol! :)

    • carol7777 profile image

      carol stanley 5 years ago from Arizona

      I appreciate this hub because this is all new to me. I learned a lot and will vote up, bookmark and share.

    • zsobig profile image
      Author

      Sophie 5 years ago from United Kingdom

      I'm glad I can help + thank you for your comment, hopefully I can help you guys to earn a bit more :)

    • profile image

      ignugent17 5 years ago

      Very useful and interesting. I think I will be back to read it again and again. Thanks for sharing. :-)

    • petersavage profile image

      petersavage 5 years ago from Australia

      Excellent explanation!

    • zsobig profile image
      Author

      Sophie 5 years ago from United Kingdom

      Thanks a lot Paul, I really hope I am able to help others with this article, too. This is a very interesting part of HubPages and online marketing, so it is the best if each writer here knows how does it work.

      I appreciate your comment and the sharing!

    • Paul Kuehn profile image

      Paul Richard Kuehn 5 years ago from Udorn City, Thailand

      zsobig,

      This is a very interesting and useful hub. You have done a great job in enlightening me on CPM and explaining how it might fluctuate. When I was getting a lot of clicks, most of those clicks were for keywords which weren't very competitive. When I did have competitive keywords, the CPM seemed to go up. Voted up and sharing.