Cost per thousand impressions, abbreviated as CPM (cost per mille--"mille" is Latin for thousand), has become the standard way to measure the cost of Internet advertising. This figure tells advertisers how much bang they're getting for their buck, and it allows them to compare the relative effectiveness of various ad campaigns, regardless of the cost of those campaigns or the number of people who see the ads. For example, a $50,000 campaign that generates 1 million impressions is less effective than a $1,000 campaign that generates 100,000 impressions because its CPM is higher ($50 vs. $10). Calculating CPM is easy.
Ad up the total cost of your ad campaign. This includes expenses to produce the ads and the cost of buying ad space on websites. For our example, let's say your campaign cost $10,000.
Determine the total number of ad impressions. One impression is one person seeing the ad one time, whether it's a banner ad, text ad, Flash video or whatever. Internet ads are sold one of two ways. You can place an ad on a specific page or pages for a given length of time and then count the number of times the ad is loaded during visits to the site, or you can simply buy a certain number of ad impressions and your ad will be loaded that many times. Let's say your campaign had 420,000 impressions.
Divide the number of impressions by 1,000. This is the number expressed in thousands. In our example, the result would be 420.
Divide the total cost of the campaign by the number calculated in Step 3. This is your cost per thousand impressions. In our example, it's $23.81. Expressed as a formula, the calculation is CPM = COST/(IMPRESSIONS/1,000).
Websites often charge advertisers a CPM rate. But remember that this rate is only the cost of the ad space. It's not your true CPM, because you still have to factor in your development costs. So if a site sells you 100,000 impressions at a CPM of $15, for a total of $15,000, add that figure to the costs of producing the ad in Step 1, then run the calculation.