Calculation of the CPM
The basis for calculating the CPM is the advertising price and the total number of views (or contacts). Each potential customer is defined as a contact. The CPM can therefore be calculated as follows:
Price of the campaign / gross reach x 1000 contacts = CPM
In simple terms: you divide the total advertising costs by the reach achieved and scale the result up to 1,000 contacts.
Example of CPM Calculation
A campaign costs 500 euros and achieves 50,000 contacts.
CPM = €500 / 50,000 × 1,000 = €10
In this example, the CPM amounts to 10 euros. This means: For every 1,000 impressions, 10 euros in advertising costs are incurred.
A low CPM is generally attractive because reach is purchased more cheaply. At the same time, a low CPM is not automatically a good overall result if the contacts are hardly relevant or do not elicit any reactions.
CPM Calculator
Here you can easily calculate the cost per mille (CPM). To do this, enter the total costs of the campaign under “Price of the campaign” and the total number of contacts under “Gross reach”. The CPM will be calculated automatically.
How good is a CPM?
Whether a CPM is good or bad cannot be answered universally. The assessment depends, among other things, on
- which channel the advertising is displayed on,
- how precisely the target audience is addressed,
- which placement has been booked,
- how high-quality the environment is,
- and what campaign objective is being pursued.
A higher CPM can certainly make sense if the target audience is reached very precisely or if the advertisement is displayed in a particularly relevant environment. Conversely, a very low CPM is not automatically efficient if the contacts generate little attention or have minimal impact.
Advantages and Disadvantages of the CPM
Advantages of the CPM
The CPM is particularly useful when you want to compare advertising costs across channels. It provides transparency regarding how expensive reach is in different media or placements. This is helpful for media planning, as budgets can be assessed and allocated more quickly.
Another advantage: the CPM is easy to understand and simple to calculate. Especially in the early planning phases, the metric provides a good initial orientation for costs and reach.
Disadvantages of CPM
The biggest disadvantage of CPM is that it makes no statement about the quality of the contacts. The metric does not take into account clicks, leads, purchases, or other conversions. Therefore, CPM is of limited use when campaigns are to be evaluated primarily on performance.
Moreover, the same CPM can be assessed very differently in different contexts. 1,000 contacts in a highly relevant B2B target group should be viewed differently than 1,000 rather nonspecific impressions in a broad reach campaign.
CPM vs. CPC vs. CPA
Difference between CPM, CPC and CPA
- The CPM measures the cost per 1,000 contacts. It is particularly relevant when reach and visibility are the focus.
- The CPC (Cost per Click) measures how much a click on an advertisement costs. This metric is more focused on interaction.
- The CPA (Cost per Acquisition/Action) indicates the costs incurred for a desired action, such as a lead or a purchase. This makes the CPA closer to the actual conversion performance.
For branding campaigns, the CPM is often a suitable metric. For performance-oriented campaigns, CPC, CPA, conversion rate, or ROAS should also be considered.
When is the CPM suitable?
The CPM is particularly suitable for campaigns where brand awareness, visibility, and reach are the primary focus. This is relevant, for example, in display campaigns, video ads, awareness campaigns, or high-reach placements.
The CPM is less meaningful when the primary goal is leads, sales, or other concrete actions. In such cases, the CPM should be understood more as a supplementary metric.
Do you want to improve your CPM and need support? Then please contact us! Would you like to learn more or have your team trained on this topic? Then take a look at our analytics seminars.
