In a nutshell:
- CPM stands for Cost per Mille—the price per thousand ad impressions.
- It sounds simple, but in practice it’s a performance metric that many SMEs misinterpret.
- We explain when CPM makes sense as a target metric, when it can mislead you, and how it relates to CPC and CPA.
If you want to increase your brand awareness and attract more customers, you can’t avoid running ads in the long run. In marketing, CPM plays a crucial role in reaching as many people as possible with targeted ads. We explain exactly what this entails in this article.
What does CPM mean?
CPM stands for “Cost per Mille.” The abbreviation represents a billing model used to calculate the cost for 1,000 impressions. An alternative description in German is the “price per thousand contacts.” In marketing, “Cost per Mille” is used both online and offline.
“Cost per Mille” is therefore the price a company is willing to pay to have its ad displayed 1,000 times. A distinction is made between “gross cost per mille” and “net cost per mille.” Important: Here, only the reach is calculated, not clicks or interactions.
It’s also important to note that “Gross Cost per Mille” includes contacts who have seen the ad multiple times. This means the ad isn’t necessarily shown to 1,000 different people; it can be shown to the same person multiple times. With “net cost per mille,” the ad is actually shown to 1,000 people.
| Good to know: In Germany, the abbreviation TKP is often used as a synonym for CPM. This stands for “Tausend-Kontakt-Preis” or “Tausenderkontaktpreis.” The equivalent in English is “Thousand Ad Impressions.” |
How is CPM calculated?
There is a simple formula for calculating “Cost-per-Mille.” You divide the ad price by the ad’s reach and multiply it by 1,000:
| (Cost / Impressions) x 1000 = “Cost-per-Mille” Example: 500 / 100,000 x 1000 = €5 |
How expensive an ad ultimately is depends on various factors: These include the type and quality of the website, as well as the ad’s design, placement, and the target audience you want to reach. The price is set by the respective network where you advertise.
An alternative: You can also approach it the other way around and calculate the total advertising costs based on the “cost per thousand impressions” and the reach. The amount due for the ad placement is then set in advance based on 1,000 impressions.
What is the difference between CPM and CPC?
We’ve already defined what “Cost-per-Mille” is. So let’s look at CPC. This stands for “Cost per Click,” which refers to the cost per click. You should always choose “Cost-per-Mille” when you want to increase your brand awareness and engagement. This is because it allows you to define most precisely where and to which target audience the ad should be placed.
An example of CPM: your target audience consists of divers. Your ad for diving vacations will then only be served on websites that have thematic overlaps. Important to know: You always purchase 1,000 impressions, regardless of the price.
In contrast, CPC is used to increase conversions—whether as website visitors or customers. For example, if a user visits a website about “long-distance travel” and your ad appears and they click on it, you pay for that exact click.
Combine CPC and CPM?
This isn’t possible within a single campaign. However, you can create two separate campaigns: Use the CPC ad to generate traffic and the CPM ad to further expand your reach and conduct retargeting.
How is CPC calculated?
CPC provides greater transparency when running ads and thus better budget control. In Google Ads, you determine the cost per click by defining in advance the maximum ad spend. The higher your bid, the more prominently your Google ad will be displayed.
You can also run CPC ads on social media channels like Facebook. However, you can’t define exactly how much you’ll have to pay per click. That’s because the system behind it is designed differently than Google Ads. You don’t have to pay a fixed price for your ad; instead, you participate in a bidding process between you and other advertisers.
Which platforms use CPM?
In theory, any platform that can be advertised on can use a “cost-per-mille” model. Whether analog or digital. TV commercials and radio ads are also billed via CPM. Anyone involved in online advertising is likely familiar with “cost-per-mille” from search engine advertising, Google Ads, and sales on Amazon.
Social media channels such as Facebook, Twitter, Instagram, and Pinterest also use the “cost-per-thousand” model. It doesn’t matter where or how the ads are displayed—whether on mobile devices or desktops. However, “cost per mille” may vary slightly depending on the device used.
Furthermore, it’s important to know that no single advertising platform is particularly suited for “cost-per-thousand” ads. What matters most is that you know your target audience and choose the platform accordingly.
Platforms at a glance:
- Google Ads
- Amazon
- LinkedIn & Xing
- YouTube
CPM in Marketing – How Waterproof Web Wizard Can Help You
In theory, you now know everything important about CPM in online marketing. However, placing ads is actually quite complex in practice. It’s always a good idea to have experts guide you through the process and assist you with the setup. Or maybe you’d simply like to outsource this work? In that case, we look forward to hearing from you. We specialize in marketing strategies and SEO, which includes Google Ads. You can reach us by phone at +49 751 95899217 or contact us via our contact form. Feel free to read our customer reviews to get a better sense of who we are.