What is Cost-Per-Mille?
Cost-per-mille (CPM) is a form of billing for advertisements in media planning. In this method, which is alternatively known as thousand-contact price (CPM), the price of an ad is billed per thousand views.
- Is primarily used in the context of digital advertising
- Is an uncomplicated billing method for advertisements
- Is the most frequently used model besides cost-per-click
How does the cost-per-mille accounting procedure work?
The Cost-per-Mille method is ideally suited for online marketing. However, it can also be used in TV, magazines or even in radio advertising. However, since it is very easy to check how often ads are shown, especially on the Internet, the CPM method is particularly popular for digital media advertising. The French term “mille” (one thousand) already indicates that the number of views is 1,000 each. The advertiser pays a predetermined amount to the advertising network or partner when his ad is played to 1,000 people. This is where the German term Tausend-Kontakt-Preis or simply Tausenderkontaktpreis (TKP) comes from. This can concern insertions both on one and on several pages. This method therefore describes the price of an advertising measure or the placement of an ad for a company. Both the net range of coverage and the gross range of coverage can be assumed. The former is taken into account if users see the ad more than once. Here the double views are not counted, so that finally 1,000 different people have seen the insertion. With the latter, double views are not taken into account. So it counts every time the ad was simply called up, no matter by whom. Picture ads and other multimedia formats are better suited for this than text ads.
To calculate cost-per-mille
How exactly does this method calculate? The procedure is quite simple: Lets assume that a website has 150,000 unique users per month. If a cost-per-mille of five EUR has been estimated in advance for this, then 750 EUR commission is due for the advertising measures (e.g. banner advertising on the edge of the page). The exact price for a particular ad is determined by the advertising network or the partner (publisher) using various factors. Naturally, advertisements on high-reach pages will be more expensive than those on the weaker ones. In addition, larger ads are usually understandably also more expensive than smaller ones. The quality of the visible area for the ad on a website also plays a role. The amount of the agreed sum can vary depending on the quality of the target groups. Business-to-business sites usually have higher CPM prices than business-to-consumer sites. In addition, there are many other factors that can play an important role in pricing, such as the overall quality of the website in question. The higher the click-through rate of an ad, the more suitable it is for cost-per-mille billing. For high CTRs and leads, sales or other conversions, ads must be created with the highest possible quality and click-through rate. Special advertising content can even be used where users do not even have to click on the ad. For example, advertisements for publications or events and the like already contain the most important advertising message (namely the date). Advertisements based on cost-per-mille can be planned more precisely in terms of reach. With cost per mille ads, large online advertising networks such as Googles Display Network offer a simple billing method for marketing a wide variety of ads. This type of billing is particularly suitable for achieving a relatively high reach at relatively low cost. By means of a click-strong design of the advertisement, a CPM basis can significantly exceed the efficiency of the billing by clicks (CPC). A challenge that should not be underestimated in comparison to cost per click billing is the cost-benefit balance.