Cost-per-thousand impressions (CPM) is a vital component of any paid media plan. Cost-per-thousand impressions is how much ad spend it takes to purchase 1,000 ad impressions. This can be calculated and analyzed at the aggregate level by evaluating the CPM of the total advertising spend, or analyzed by zooming in on a specific channel and tactic.
It's common to evaluate CPM after a campaign has ran. In this case you would use your net advertising spend and your total impressions served. Other times you will be agreeing to an upfront CPM, typically from a media vendor. In this case you can use your agreed upon net ad spend and the agreed upon CPM to estimate the impressions you will later serve.
Estimate cost-per-thousand impressions based on ad spend and impressions served.
CPM Excel Formula
=sum((spend/impressions)*1000)
Estimate impressions based on ad spend and cost-per-thousand impressions (CPM).
CPM Excel Formula
=sum((spend/cpm)*1000)
Spend: Spend is the net advertising cost. This does not include management fees, creative or anything else - purely the advertising hard cost.
Impressions: Impressions are the amount of times ads appeared, or were shown, in the given channel. Essentially how many ads were served by the advertising spend.
Click-through Rate (CTR): CTR is the rate at which impressions result in a viewer of the ad clicking on it. If 100 ads are shown and 1 person clicks, that is a 1% CTR. Clicks / Impressions = CTR
Clicks: Clicks are the amount of people who clicked on, or took an action on an ad. The click metric is also commonly associated with the number of website visitors.
Cost-per-click (CPC): Cost-per-click is the average amount paid in advertising spend per click on the ad. Spend / Clicks = CPC
Conversions: Conversions - which could be sales, leads, downloads, email opt-ins - is the total volume of conversion actions attributed to the ad spend.
Conversion Rate: Conversion rate is the rate at which a click turns into a conversion action such as a lead form submission, ebook download, email opt-in, sale, etc. Conversions / Clicks = Conversion Rate
Cost / Conv.: Cost-per-conversion is the average amount of advertising spend invested per resulting conversion action. Spend / Conversions = Cost-Per-Conversion
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