Cost per thousand impressions (technically, “cost per mille”).
The CPM model refers to advertising bought on the basis of impression. This is in contrast to the various types of pay-for-performance advertising, whereby payment is only triggered by a mutually agreed upon activity (i.e. click-through, lead, sale).
The total price paid in a CPM deal is calculated by multiplying the CPM rate by the number of CPM units. For example, one million impressions at $10 CPM equals a $10,000 total price.
1,000,000 / 1,000 impressions = 1,000 units
1,000 units X $10 CPM = $10,000 total price
How do CPM ads compete with CPM ads?
CPC bids are effectively converted to CPM bids. To make an apples-to-apples comparison, Google et all estimate how many clicks a CPC ad is likely to receive per 1,000 impressions, and use the CPC and CTR to calculate an equivalent CPM.
Formula: CPC bid x CTR estimate x 1,000 = effective CPM
Example: $2 x (1% x 1,000) = $20 effective CPM
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eCPM, click-through rate (CTR), cost-per-action (CPA), cost-per-click (CPC)
view all terms in the Online Advertising glossary or all terms in the Digital Marketing glossary