Cost per impression

Cost per impression (also known as cost per mille, CPM) is a marketing metric that allows advertisers to evaluate their campaigns' effectiveness. This metric helps you calculate how much you will have to pay for 1,000 impressions.

In this article, you'll get to know why the cost per impression metric is important, discover how to calculate it, and get some tips on how to reduce it.

Why is CPM important?

Using the cost per impression metric, you can calculate how much you have to pay for a thousand impressions. One impression stands for one ad view, so every time a user sees an ad, it counts as one impression. This pricing model is typically used for Google, Facebook, and LinkedIn ads.

CPM is a valuable metric for marketers since it helps them weigh up the efficiency of each promotional channel. For example, if 1,000 impressions on Google cost you less than the same amount of impressions on Facebook, Google ads are probably a better fit for your strategy. Still, low ad costs do not necessarily mean success, as they may be a sign of poor traffic quality. You might want to find out more about each publisher before placing your ad on their platforms to avoid wasting your budget.

Other than that, keep the following factors in mind, as they influence your CPM rate:

• industry;
• demographics;
• location;
• season;
• website topic (the relevance ratio of a website's and your ad's topics);
• website traffic;
• ad quality;
• device where your ad will appear;
• number of ads on a page;
• time of day.

The cost per impression metric is essential for startups and businesses releasing new products since it increases brand awareness and recognition. Placing CPM ads on relevant websites allows advertisers to reach out to relevant audiences, increasing their campaigns' effectiveness.

If you have tested several ads and identified one that brings more conversions, you can implement it using a CPM pricing model, ensuring a higher ROI.

Now that you know the peculiarities and advantages of the cost per impression metric, it's time to find out how to calculate it.

How do you calculate your cost per impression?

The cost per impression formula is pretty straightforward:

CPM = (Total ad spending/Number of ad impressions)*1000

You need to divide your campaign costs by the number of ad views and multiply by 1,000. Let's say you want to spend $100 and get 3,000 impressions on a certain resource.

CPM = ($100/3,000)*1000

So, your CPM will be $33,3.

Remember that there’s no good or bad CPM rate since it’s different among businesses and industries. Still, if you’re looking for ways to reduce your expenditures, read the next section to get some tips on how to do it.

How do you lower your CPM?

We’ll share some tips you can use to save money when working with Facebook and Google ads.

1. Craft highly relevant ads. Each social media platform and search engine wants its users to have the best experience. Advertising algorithms make sure that people see only the ads they might be interested in, so you should take Google Ads Quality Score and Facebook Relevance Score seriously. 10 points mean that you can perfectly meet your potential audience’s preferences. The higher the score, the less you’ll need to pay. You can segment users by location, interests, age, and other categories to create highly relevant and targeted campaigns.
2. Choose the right number of ads. This step will help you prevent users from being annoyed by your ads. The best number of ads for one user is considered to be 3 — it helps users remember your brand without being intrusive. Besides, if users don’t engage with an ad when seeing it for the 4th time, it means that it is not relevant to them. As a result, your CPM rate will increase.
3. Make use of social proof. People are eager to trust other people more than companies, especially when dealing with a new product. So, you can mention that your product is recommended by a well-known opinion leader or an established brand or add some short testimonials from your loyal customers.
4. Arrange a special offer. Social media users see hundreds of ads every day and rarely expect to get something valuable from them. Break this stereotype and offer a deal people will find difficult to ignore. Analyze your competitors' offers to come up with something better. Your task here is to engage users and bring them to your business — you can do this by offering a substantial discount or a free trial.
5. Gather a lookalike audience on Facebook. This is a great chance to lower your cost per impression since Facebook wants to provide its users with the best experience. A lookalike audience includes people who share your existing customers’ characteristics. If lots of your clients are middle-aged men from Australia who enjoy traveling, people with the same characteristics might also be interested in your company.
6. Add a CTA. This seems pretty simple, but many advertisers forget to add CTA buttons or don’t know which one to choose. As a result, people skimming your ad won't know what they should do next and just scroll down their feed, ignoring your message. State what users should do next clearly and encourage them to start communicating with your brand. Personalized CTA buttons seem to strike the right chord with customers, but you also cannot go wrong with something classic, like “Learn more.”
7. Increase your ad relevance score. We’ve already mentioned that search engines and social media want to meet their users’ needs, so they reward advertisers with low CPM rates. The higher your ad relevance score (10 is the highest), the less money you’ll pay. To get more points, analyze your audience thoroughly before advertising something. Let’s say that you are promoting your forest resort and target people based on their location to choose those who live near your resort. This might be a huge mistake. First, learn more about your typical clients' age and income — your resort might be a premium offer, which is probably not the best fit for young people. Second, consider your audience's interests and take the ad relevance score seriously.

Congrats, now you know why the cost per impression metric is essential for marketers and can calculate and lower it. So, follow our tips to create a relevant ad campaign for social media!