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What Is Cost-Per-Impression (CPM)?

Cost-Per-Impression (CPM), also known as cost per mille, is a digital advertising metric used to quantify the cost of a thousand impressions or views of a particular advertisement. The term "mille" originates from the Latin word for "thousand," aligning with the quantification method used in this metric.

The CPM model is commonly used in various digital advertising platforms, including display advertising, social media advertising, and programmatic advertising, to measure the cost-effectiveness and reach of a particular campaign. It is typically used for campaigns designed to raise brand awareness or visibility rather than direct response or engagement.

CPM Formula

To calculate CPM, you divide the total cost of the campaign by the total number of impressions, then multiply the result by 1,000.

For example, if an advertiser spends $200 on a campaign that yields 50,000 impressions, the CPM would be calculated as follows:

($200 / 50,000) x 1,000 = $4

In this instance, the CPM would be $4, meaning the advertiser pays $4 for every 1,000 impressions of their advertisement.

It's important to understand that an "impression" in this context refers to the number of times an ad is displayed, regardless of whether it is clicked on or engaged with in any other way. It merely indicates the potential reach of the ad, not its effectiveness in terms of engagement or conversions.

Although CPM is a valuable metric for understanding the potential reach of an ad campaign, it should not be the sole measure of a campaign's success. Other metrics, such as click-through rates (CTR), engagement rates, conversion rates, and return on ad spend (ROAS), should also be considered to gain a comprehensive understanding of a campaign's overall performance. 

Furthermore, optimizing for CPM alone may lead to overlooking the quality of impressions and the actual engagement driven by the ads.

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