CPM, or cost per mille, is a traditional metric used in pricing advertising. It refers to how much it costs to have an advertisement shown 1,000 times. When a company buys advertising, the CPM it pays can vary based on the quality of the advertising. Highly targeted ads in media with demographically desirable viewers tend to be expensive, while CPMs for less-targeted ads can be very inexpensive.
The CPM cost of advertising online can vary greatly. For instance, a banner ad appearing anywhere on a site tied to the advertising industry could carry a $65 CPM, while a targeted one costs $100, as of 2013. A banner ad on the homepage of the website for a major Midwestern newspaper could carry a $14 CPM, while a run-of-the-site untargeted ad is $9. More-generic advertising is less expensive. According to Marketing Charts, the global average effective CPM was $1.22 as of June 2013. This statistic includes advertising all over the Internet.
According to data from Nielsen, the average CPM of an ad on prime time network television in 2013 was $25.06. A chart provided by the Outdoor Advertising Association of America placed magazine CPMs between $8.40 and $21.30, while newspaper ads fell between $28 and $43. Radio ads ranged from $2.10 to $7.80, although some of this data comes from 2007 and 2008.
Given the wildly divergent prices between different media and types of advertising, choosing the right one can be challenging. Research conducted by the Internet Advertising Bureau and reported on by media analyst Thomas Baekdal indicated that the right type of advertising is a blend of multiple media. The study showed that shifting 15 percent of a TV budget toward digital increased impact for the same cost.
The cost per mille standard comes from old-style non-interactive advertising and is not always applicable in digital media. A CPC, or cost-per-click, model has the advertiser pay only when the party that sees the ad clicks on it. CPA, or cost-per-action, ads only require payment when a user takes action. CPM ads are cheaper than CPC ads, which are cheaper than CPA ads, all other things being equal, but they also promise less. For companies that want to get something clear and provable from their ads, the CPC and CPA pricing models may be better choices.
