Is CPM Advertising Future of Online Marketing?
CPM stands for Cost Per Milli, also known as “Cost Per Thousand (CPT), is where advertisers pay for exposure of their message to a specific audience. In CPM advertising setup, advertisers pay for every 1,000 impressions of their banners. For example, if a webpage with an advertising banner has 10,000 page views every month and publisher is charging CPM rate of $25, the monthly cost for the advertiser would be $250 ($25X10,000/1,000).
Depending on the traffic and visitor demographics, CPM cost can vary from website to website. In general, CPM pricing varies from $1 to $135. This is a broader range and a website with highly targeted traffic can charge a lot more than this upper range. For example, an automotive forum may charge a CPM of $20 since some of the traffic is very general in nature and its quality is hard to quantify. Additionally, if you’re an auto dealer and advertising on the search result pages on autotrader.com, you’re likely to pay a CPM that is close to $80 since traffic is already filtered out and a visitor on these pages is more likely to respond to an auto dealers advertisement.
CPM advertising concept is vastly different that other common methods such as CPC (Cost Per Click). In CPC model, advertisers are only paying for action or clicks. If there are no clicks, the advertiser pays nothing regardless of how many times their advertisement was shown. The CPC advertising is more common with search network and broader content network. However, niche content networks tend to rely heavily on CPM advertising model.
CPM advertising is the channel targeting. As an advertiser, you can target specific website(s) as well as particular sections (channels) on a site. This flexibility offers more control over the advertising dollars and better performance metrics for the advertiser to measure ROI (Return on Investment).
Should You Consider CPM Advertising?
It depends on your situation. Most of the smaller advertisers feel overwhelmed by the CPM concept itself. Most of the skepticism and nervousness comes from the fact that in pure CPM model, the advertiser may end up paying a significant amount of money with no results. This is only true to a certain extent. In CPM advertising model, there is lot more homework for an advertiser to be done upfront. Smaller advertisers often tend to be unprepared for this task due to the large resource and skillset gap. This gap exists because smaller advertisers either don’t want to invest more time and money or they don’t have the budgets to handle this additional work.
In addition an advertiser who has done the legwork up front will drive significant return from CPM advertising. Since CPM advertising is banner based, an advertiser will get a lot more exposure and branding opportunity than CPC or any other advertising model. Also, the financial cost is not a significant factor if channel selection is done right. For example, a webpage with CPM cost of $20 and a CTR (Click Thru Rate) of 1% will generate 10 clicks for $20 resulting in a CPC of $2. Often this cost is quite comparable to traditional CPC setup while driving more qualified leads from CPM method.
What Does the Future Look Like?
One of the key features of CPM advertising is a lot more flexibility for both publishers and advertisers. There are thousands of content networks and industry-specific websites that can be targeted independently. It also levels playing field by eliminating monopoly that Google or Microsoft have on CPC advertising market. Smaller and local advertisers benefit most since they can work the advertising deals locally within their communities without having to go through a third party such as Google or Microsoft. This should further reduce their advertising cost and improve return on investment.