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Monday, September 13, 2021

The Intricate Details to Calculating Cost per Impression

In this age of digitization and digital marketing, running an online market is not an easy job. Of all the important terms you need to be equipped with when beginning your online marketing campaign, CPM or Cost per Mille Impression is one of the most valuable of them all. 

What is Cost per Impression (CPM)?

Cost per mile

CPM or Cost per Mille Impression is an online advertising phrase that points to the cost of one thousand ad impressions. One impression is basically a potential customer looking at your ad. So, more simply speaking, it is the average price a digital marketer will have to pay to receive one thousand ad impressions. 

Many might confuse this term for Cost per mile. However, the correct phrase is a cost per mille impression, mille, which means thousand in Latin. 

Google cost per impression, which Google also calls a viewable CPM or average cost per impression, is essential that at least 50% of your ads need to be visible on the screen for a second if not more. This according to Google creates a lasting impression and that’s what you pay for. Moreover, for video CPMs, 2 seconds of your ad video playing before any other video counts as a viable impression according to Google. Therefore, even if a viewer clicks skip the video after 3 seconds that will count as a view for you.

This similar model is opted by most social media websites, Facebook ads, and their cost per impression and Instagram ads and their cost per impression have similar features. 

Cost per Click vs. Cost per Impression 

cost per click

If the total addressable market of your product is broad, then CPM is perhaps a worthy way to measure your views and exposure into the digital world. However, if your business addresses a niche market and a specific set of people only then CPM might not be a likely model to work with. The Cost per Impression advertising works not on how many clicks your ad receives but on the amount of time it is being displayed online. It is actually extremely easy to gain a thousand impressions and in fact, you pay every time your ad is being viewed by a single person. There are times when you have web users surfing the net all day long and they might see your ad on display maybe twenty, thirty times, and each of such views will amount to the total CPM. However, there is also the problem that even if a person views your ad a hundred times a day, they still might not click on it. 

Here, the cost per click or CPC will work in your favour. Cost per click or CPC is when you pay the publisher for every click on the ad. It is therefore a more effective way of determining your ad campaign’s ability to spark interest in value propositions. While the CPM goal is easily achieved as impressions are quickly made, many believe that cost per click might help in the long run since impressions cannot guarantee a click on your ad. 

When to use CPM?

So when is the perfect time to use Cost per Impression? With the potential of having your ad viewed a thousand times by countless viewers, we believe the best time to use CPM is when you are looking for brand exposure. For example, if you have launched a new product and new want that news to reach as many people as possible or the news of an event by your company, CPM is the best way to go. 

Movies, festivals, music concerts, conferences all benefit greatly from this CPM model. Similarly, new apps, video games, album releases by musicians, or even local services also boost recognition and even at times to potential engagement using the Cost per Impression model. 

The best time therefore to achieve perfect digital marketing through CPM is:

When you have a displaying ad which is a high click through rate, which is basically that your ad will probably guarantee a click from every viewer who views it. 

You are planning to expose your brand to the world and maximize brand awareness. You are not bent on visitors buying your product or signing up for some new leads. The ad is only there for views. 

How to calculate Cost per Impression?

average cost per impression

Calculating how much you are paying for each impression for your average cost per impression campaign is actually extremely straightforward and simple. 

To do so, you just have to have an understanding of simple mathematical rules. 

Just divide the total amount you are spending on your CPM campaign by the number of impressions you get for that cost. 

Let us look at an example to better understand this. 

Imagine your CPM advertising campaign offers you 400,000 impressions for $1000, then your cost per impression formula will be:

 $1000/400,000 impressions, which equals $0.0025 per impression. 

Here you are paying not even one per cent per impression, which is amazing, but how do you determine how many of the views are potential buyers? 

This also has an extremely simple formula.

Say 1% of the people viewing the ad has clicked though, which means 4000 people. 

Therefore the formula will be:

Total spend/ total click though, which means,

$1000/4000, which equals $0.25. 

Is CPM the best option?

While it may seem that CPM is the easiest marketing campaign model there is from our example which shows a great click through rate at a lower cost, our situation was completely hypothetical. In the real world, it is not always this simple. Many times the average cost per impression formula does not amount to a well-paying cost per click. So, the best way to determine if CPM is a good option for you is to run both CPM and CPC simultaneously and see which performs the best for your brand and product. Many digital marketing experts also suggest that using CPM and projecting your ad to better locations like often used social media apps like Facebook, Instagram, and Twitter will amount to the best outcome. Again, this is also a question of speculation and it is up to you as a digital marketer to see which campaign works best for you—only CPM, only CPC, or a combination of both CPM and CPC

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Kiara Dawson
Kiara Dawson comes from an Engineering background, with a specialization in Information Technology. She has a keen interest and expertise in Web Development, Data Analytics, and Research. She trusts in the process of growth through knowledge and hard work.

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