Saturday, October 11, 2008

What is CPM advertising?

What is CPM advertising?
CPM is an acronym for Cost Per Thousand -- the "M" in CPM derives from the Latin "mille" for "thousand." CPM is commonly used in marketing as a benchmark to calculate the relative cost of an advertising campaign or an ad message. Rather than an absolute cost, CPM estimates the cost per 1000 views of the ad.

It is calculated by:
Total budget / (Impressions/1000) = CPM

Although cost-per-click, or CPC, advertising is enjoying great popularity, CPM (cost per thousand impressions) advertising is still an effective way of reaching potential customers on the Web. Instead of paying per click, in a CPM campaign you purchase a set amount of impressions.

CPM-based advertising can be a cost-effective alternative to CPC deals. To illustrate this point, let's compare the overall expense of two similar campaigns.

In CPC-based advertising, you pay for each click your ad receives. Let us say that you are spending $1 for each click; 10 clicks costs you $10.

In a CPM-based campaign, you may pay $3 for 1,000 impressions. If your ad receives a click-through ratio of just 1 percent, you're paying $3 for the same 10 clicks.

Current results have shown that text-based CPM ads often receive more attention that traditional banner ads. In fact, the average view time for a text based ad averaged 7 seconds, while a graphical ad only averaged 1.6 seconds. Text CPM ads are starting to become more popular and may be a viable alternative to CPC-based advertising.

CPM-based advertising may be more suited for your company if your desired keywords are very popular and expensive. Instead of paying $5 for a single click, you could but 1,000 ad impressions. This can add up over time.

Although click-through ratios for CPM-based advertising are low, click-throughs aren't everything. Even an unclicked (but viewed) ad can play an important role in promoting your company. A well-designed ad will catch a viewer’s eye and may promote brand recognition, even if the viewer doesn't click.

Targeted CPM-based advertising is also beginning to catch on, which may even the playing field for advertisers looking for a CPC alternative. If you can display your ad to a targeted audience, your click-through ratios will improve.

Many sites offer targeted CPM-based advertising options, and you should be able to find a service that will mesh well with your company’s offerings. Targeted advertising greatly increases overall effectiveness of your ads, and the addition of CPM-based targeted advertising may be a great benefit to many small companies.

The downside to CPM-based advertising is that the minimum purchase of impressions could be more than your company requires. While $5 per thousand impressions is very appealing, a minimum purchase of one million impressions can quickly scare off many businesses.

However, there are companies that offer low minimums, and it pays to do your homework before selecting a company that requires the advance purchase of a large amount of impressions.

If your budget allows for it, test several different methods of advertising at the same time and track the results. This way you can see which method is best suited for your particular company and gives you the best value for your advertising dollar.

See next posts for list of CPM program

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