The advertising acronym CPM stands for “cost per thousand impressions,” which is a measurement of how much money it costs you to reach 1,000 readers, viewers, visitors or listeners.

A publisher’s media kit will usually give you an estimate of the CPM and, if you’re advertising online, you can track the CPM in real-time. Always keep in mind that CPM only measures a potential audience. There is seldom a guarantee that people will notice your ad, let alone become a paying customer because of it.

Cost per thousand (CPM) is the most common method for pricing web ads in digital marketing. The method relies on impressions, which is a metric that counts the number of digital views or engagements for a particular advertisement.

Impressions are also known as “ad views.” Advertisers pay website owners a set fee for every thousand impressions of an ad. While an impression measures how many times an ad was displayed on a site, it does not measure whether an ad was clicked on.

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The click-through rate (CTR) measures whether an ad was clicked on, representing the percentage of people who saw the ad and clicked on it. Advertisers frequently measure the success of a CPM campaign by its CTR, For example, an advertisement that receives two clicks for every 100 impressions has a 2% CTR.

You cannot measure an advertisement’s success by CTR alone because an ad that a reader views but does not click may still have an impact.

• What is a Good CPM in Advertising?
• How do you Calculate CPM Advertising?
• What does CPM stand for in Facebook ads?
• How to Reduce Your Facebook Ad CPM

What is a Good CPM in Advertising?

With 88 percent of Americans using the internet to make purchasing decisions, it’s probably no surprise that businesses rely on web ads to reach customers.

When your business places an ad online, your success is measured based on CPM, which is the cost per 1,000 website impressions. A typical CPM ranges from $2.80 with Google to more than $34 for a local TV spot in Los Angeles.

Your business likely has a limited ad budget, so you’re probably interested in getting a good CPM value for that money. The problem is, rates can vary widely between industries, depending on what you’re trying to achieve.

If you use a “spray and pray” approach with your online advertising, you’ll find that you can get a lower CPM, but your ads might not be targeted to people who are likely to be interested in what you offer, which means you’re throwing a large chunk of each dollar away.

A good CPM is one that works best for your own business. To determine this, it’s important to closely monitor the return on investment on the money you’re spending on each platform, then routinely tweak what you’re doing to find the best cost per platform.

You’ll need to regularly revisit this number, too, to keep up with changing social media memberships and your own evolving customer base.

Typical CPM for Google

One of the most popular avenues for advertising is Google, which still maintains the biggest market share by far among search engines. On average in the first quarter of 2018, advertisers spent $2.80 CPM and $0.75 CPC.

Across the entire Google Display Network – which includes Gmail, YouTube and other sites ­– the average click-through rate was 0.35 percent for that quarter.

Like many other advertisers, Google has you set a daily budget, which means you won’t have to worry about your cost per thousand impressions or the expense of your clicks going through the roof if you have a busy day.

On average, small businesses spend $500 to $3,000 per month on CPC. If your company budgeted $3,000 at $0.75 CPC, you’d “go dark” after 4,000 clicks, meaning your ad would no longer display until your ad budget refreshed.

Typical CPM for Social Media

Many businesses now focus a good portion of ad spend on social media, but CPMs can vary widely from one social platform to another. Twitter is the cheapest on average, at $5.76. You’ll pay an average of $6.05 for LinkedIn ads and $6.70 for Instagram. Facebook has recently become by far the most expensive, at $9.06.

You’ll pay far less for clicks on Facebook, though, so the tradeoff may be worth it. Facebook’s CPC is only $0.51 on average, compared to $0.53 on Twitter, $1.28 on Instagram and a whopping $5.61 on LinkedIn. LinkedIn’s higher price for those click-throughs can be attributed to its highly specialized B2B audience.

How do you Calculate CPM Advertising?

When working with cost-per-impression ads, there are three numbers that typically you will work with: the CPM rate; the total cost of the campaign; and, the number of impressions that the ad receives.

To determine any of these numbers, you only need two of the others. You can do these calculations yourself, using the CPM equations below, or by using any of the free CPM calculators online.

The Cost of Campaign = Total Impressions/1000 x CPM

Total Impressions = Cost of Campaign/CPM x 1,000

CPM = Cost of Campaign / Total Impressions/ 1,000

If an advertiser quotes you a cost for each impression, simply multiply that cost by 1,000 to get the CPM. For example, if the cost for each impression is 1.5 cents, then the CPM is $15. If you had 3,000 impressions, then the total cost of the campaign would be $45.

Testing Your CPM Ads

A lot of factors exist that make one ad more appealing than another. For example, if you are selling dog treats, a picture of a puppy in your ad may get you more clicks than having a photo of a mature dog in your ad. Your choice of words in the ad can also affect how many people click on the ad. Even your choice of font, font size and font color can affect an ad’s performance.

A common method of testing ads is called split-testing. Start your campaign with two ads running simultaneously – but with one key difference – such as the image you use. After a few thousand impressions, keep the ad that performs better, and drop the other ad.

You can then do additional split tests, using different images, different phrases and different colors until eventually, you find the ad that performs the best for your target audience.

What does CPM stand for in Facebook ads?

Digital marketing expert eMarketer expects worldwide paid Facebook advertising to reach almost $9 billion in 2015. The huge potential of this marketing channel has more and more small businesses wanting to learn how to make the most of their advertising dollars.

To accomplish this, business owners and marketers need to know how to measure their results. CPM, the acronym for cost per Mille — 1,000 impressions — is one of the most common methods for advertising on Facebook. But what’s a good or above-average result for a CPM campaign?

Finding Average CPM

From January 2012 to March 2012, Salesforcesocial.com — a social advertising application — examined 1 million plus ad units and 114 billion impressions on Facebook. The study discovered that telecommunications, general retail, health and beauty, publishing and entertainment performed the best based on click-through rates.

Deals and dating performed the worst. The average CPM for the high performers was $1.39, $1.39, $1.00, $1.75 and $0.78 respectively, while deals and dating had a CPM of $0.23 and $0.10. Here’s the point: When you think in terms of good CPM, you need to know the benchmarks for your industry so you can make valid comparisons.

Determining A Good CPM

By using this study, you can figure out if your CPM is above or below the average for your industry. For example, the general retail CPM is $1.39. So if you’re running general retail ads and your CPM is above $1.39, you’re paying too much, but if it is below $1.39, you’re getting a good deal. You also need to think about your marketing objectives.

If you’re trying to cause a specific action, the value of that click-through and result may allow you to pay a higher CPM. In other words, assume every visitor to your site through the ad spends $10 and earns you a profit of $2. If two visitors per 1000 take that action, you make $4 profit per 1000 impressions. In this case, any price under $4 is a good CPM for you.

How to Reduce Your Facebook Ad CPM

A number of factors can help you reduce your Facebook ad cost per thousand impressions while ensuring your ad reach is optimum and click-through rate is great as well. The experts we surveyed shared the following as their top ways to optimize your CPM:

1. Target the right audience

“The first step to lower CPMs for Facebook is to have the right niche audience targeted,” Aalap Shah of 108 insists.

“You can have an awesome ad, but if it’s not showing up to an equally-as-awesome audience, why do it?” Therefore, “the audience is always the first place to optimize.”

VR Digital’s Larissa Banting agrees, “the more in-tune and tighter the connection with the audience, the lower the CPMs become.” So, how do you go about fine-tuning your audience?

Banting suggests, “the best approach is to find an audience that is going to engage with your ads, rather than just look at them. Higher audience engagement will automatically increase the relevance score and decrease the CPM.”

Ishani DePillo of YourMarketing People adds, “test new target audiences that fit your brand. Think about their lifestyle and define audiences on Facebook based on their behavior and interests.” You can also “narrow down the audience who is going to see [your] ads on Facebook,” as

Richa Pathak of SEM Updates highlights. “Facebook ad targeting generate a large set of audience, all may not be relevant to you. Adding some exclusions and conditions with ‘AND’ function in targeting works well to reduce the unwanted impression on your ad copy.”

Pathak speaks from experience, “For example, I am a blogger and write articles on digital marketing, I have done a lot of campaigns on Facebook to drive more impression on my ad copy, I have targeted all the people in marketing and end up seeing high bounce rate. So I narrowed down my audience to the article related only. And this saved a lot of penny for me.”

The only question now is: how about you leave this step to Facebook? Sure, you can do that, but it’ll only cost you more. Maddie Hewitt from McMahon Marketing explains, “Facebook will go out and try to find the right audience for your ad, but it’s going to cost you.”

“If you do the work up front and give Facebook a blueprint of your target audience that they can build off of, you’ll see a noticeable difference in your CPM.”

So the goal is simple: “improving your audience targeting will lead to better CTR and higher conversions which means you will be paying less CPM,” in DePillo’s words

2. Broaden your audience

This may sound odd, but Thrive Advertising’s Robin Rucinsky explains, “the size of the audience generates CPM costs. It’s basic supply and demand—the more narrow and in-demand an audience, the higher the CPM.”

Since your goal is the opposite, doing the opposite will help: “broaden[ing] your audience.”

Mark Woodbury of HikeSEO further clarifies, “while increasing the size of your audience may mean showing your ads to a slightly less targeted group of people, Facebook having more options on who to show your ad to will decrease the CPM.”

“However, still [use] targeted data from the Pixel analytics to hone in on your audience,” Taylor Lindores-Reeves of Digital Speed reminds.

“For example, you would have an audience ranging from 1,000,000 to 2,000,000, a budget of at least $25 USD per day, and you’d target a broad range of interests. However, you would need to utilize the Facebook Pixel analytics and narrow down the audience using age and gender.”

So, you get the idea. As for the action plan for increasing your audience size – here are your options:

• “Increase your geographic area or decrease the layers of targeting in an ad campaign” (Robin Rucinsky, Thrive Advertising)
• “Add interests, or groups.” (Crissibeth Cooper, KNB Communications)
• “Test your target interests one by one to keep the audience broad and learn which interests and audiences will result in the highest ROI.” (Jacob Rosenberg, Tajima Direct)

3. Create a lookalike audience

This is another way to reduce Facebook Ad CPM. Odeh Ahwal of EcomDimes opines, “my number one simple, yet effective approach for optimizing my CPM for my Facebook ads is the implementation of custom and lookalike audiences!”

Ahwal does so “by categorizing the audience into 3 different groups (cold, warm and hot audience).”

Crissibeth Cooper of KNB Communications shares another way to create a lookalike audience for your ad. Cooper advises, “one great way of optimizing your cost while also balancing it with quality is by uploading a list of customer emails and allowing the platform to create a lookalike audience with it.

The idea is that your current customers like your company, so by finding people like your customers, you increase the chances that they will like your company, too.”

And, the tactic works wonders as well. Cooper confirms, “It’s a tactic that works very well for us, increasing click rates and driving down CPM cost while also keeping quality high.”

4. Improve your ad’s relevance score

Several of our expert respondents share this as their top recommendation for lowering ad CPM.

“When you focus on making ads that are relevant and engaging to your target audience, Facebook takes note of that and rewards advertisers by showing the ad to more people for less money—hence, lower CPMs,” as Andrew Schutt of Schutt Media lays out.

Upgrow’s Mia Liang also suggests the same: “do all you can to boost your relevance score, it is similar to the quality score that Google Ads gives you.”

Essentially, “the Ad Relevance rankings reflects how your ad is performing with those users that Facebook has delivered it to,” Tracy Hoeft from Amplify 11 clarifies.

Liang further explains, “Facebook issues you a number between 1 and 10 based on how much they think your ad will appeal to the people that you’re targeting. The better your ad fits with your audience the higher your relevance score. The higher your relevance score is the lower your Facebook CPM.”

Because, “Facebook wants to show the best ads to their users so they will give you a discount if you give their users something that they like,” Hoeft goes on.

In fact, Schutt calls this a “win-win-win” situation. “If you get the relevance score right with your audience… you get more impressions for less money, the users are happier, and Facebook is happier.”

So, how do you go about knowing your relevance score needs work?

Take a page from Stacks Market’s Mostafa Yasser’s FB ad book. Yasser takes the following steps: “if I want to decrease the CPM, the first thing I would do is to check the ad scores that Facebook provides if the relevancy and engagement score is low then there is something wrong with my ad creative or the people I am targeting, and I will start split testing different ad ideas and try to find more audiences to target or tweak my current one.”

In addition to split testing various ad ideas, Andrei Vasilescu of DontPayFul recommends you “narrow the target to increase the relevance score.”

Adnan Munye of AMMFitness also shares the need to specify your audience better for improving relevance score. Munye points out, “the less specific your audience, the lower the score. If you go for an entire city without the specifics, you’re throwing money down the drain.”

When you’ve a well targeted audience for your ad, your ad is also much more relevant to them better, so they engage better with it. Vasilescu elaborates, “if your target audience greatly engage with your ads, the relevance score of your Facebook ads increases. And, when relevance score increases, Facebook rewards the advertiser by delivering the ads to more relevant audiences at reduced costs.”

Thus, “you need to narrow your target audience by researching more on audience data.”

5. A/B test your ads

You saw this tip coming, didn’t you? After all, split testing is what helps us understand what exactly is working, what’s appealing to our audience and so on.

James Pollard of The Advisor Coach goes on to tell, “I’m always trying to create shareable content, so our message to be seen by more people at a reduced cost. It often takes several tries to get a huge winner but it more than pays for the rest.”

Online Optimism’s Taylor Kincaid advises the same: “test your audience to make sure you’re speaking to the right people. You can even A/B test through the split test feature right in Facebook Ads.”

Not only do you need to test your audience, you can also test other factors. Crissibeth Cooper of KNB Communications recommends you A/B test “different copy and visuals on the same audience.”

Cooper observes, “you will be able to see what type of content your audience responds to. Facebook wants each user to have a positive experience. If your ad is being enjoyed by your target (which Facebook will measure by things such as engagements), your CPM cost will be lower.

Companies whose ads have low engagement will be charged more, because Facebook is more reticent to show ads that they know users dislike.”

6. Control the budget you invest as your ad spend

This is really important. Why? Because “If you don’t set an ROI, Facebook will spend wildly, driving your CPA through the roof, ” Seth Kravitz of Phlearn explains “The algorithm is designed to generate maximum revenue… no matter the cost.” So you need to “regulate your control,” Adnan Munye of AMMFitness advises.

Munye adds, “an automatic budget will give a run for your money so you need to understand the algorithm. For this, you will have to decrease the running of CPM. Use a value-based approach of targeting to reach a larger and more specific audience.”

Socialfix’s Terry Tateossian maps out the entire plan for you:

Step 1: “Within the Facebook Ad Manager console, you can try to select optimize for clicks, pay for clicks.”

Step 2: “Then, over the course of the next few days, monitor your performance carefully.”

Step 3: “If you have a high CTR (like 1% or above), switch to optimize for clicks, pay for impressions.”

Doing so “can potentially reduce your CPC by 10-15%” In fact, Tateossian digs further, “when running large scale campaigns this cost reduction can translate to hundreds of thousands of dollars per year.” Kelsey Shaw of Kelsey Shaw Co. outlines another tactic: “always keep in mind the longevity of the campaign.”

“Facebook’s ad algorithm is designed to spend a campaign’s budget in its entirety by the scheduled end date. The longer your campaign is scheduled to run, the longer the algorithm has to efficiently test and deliver your ads to the right audience, and thus draw out the pace in which it spends your media dollars.”

Put simply, “when in doubt, extend the scheduled run time of your campaign. Longevity=Efficiency.”

7. Change your bid type

Another recommendation to slash cost per thousand impressions comes from Burt Valentine of HowToWatch and it is centered around setting “your bidding type to optimized CPM or oCPM.”

Valentine explains, “by selecting this bidding type you will make Facebook show your ads to those who are more likely to take the action you want. This bid type will make adjustments to show your ad to the people who are interested in the product or service you are selling. The conversion rate will increase and CPM will remain under your budget (low).”

8. Add engaging features to your post

Undeniably, “it is common nowadays for users to scroll right past posts that requires a lot of reading, as they don’t have the patience or time to get interested. Users tend to also get more annoyed when they see an ad interrupting their feed as they scroll,” as Andrew Ruditser of MAXBURST notes.

Plus, there’s a lot of noise out there. Ruditser shares, “although Facebook is one of the best platforms to use to promote your ads, it is difficult to catch user’s attention in the mist of many other brands trying to do the same thing.”

But there has to be a solution to this, isn’t it? Lucky for us, there is: “adding the popular choice of memes, gifs, videos, etc.” These “will grab that user’s attention and will give your post a higher chance of users engaging and wanting to read more. If more users engage with your post and share, your post will gain more impressions.”

In simple words, “it is important to get your post to stand out and make it more engaging compared to others.” Therefore, engaging features such as memes and videos are good starting points.

This brings us to an essential point – using videos in your ads. Let’s talk about it next.

9. Select the right creative format for your ad

We already know that videos are among consumers’ favorite content type on social media. But that’s not all. Not only do videos get more eyeballs to your ads, but they reduce your CPM. Hard to swallow? Hear it from the experts. HikeSEO’s Mark Woodbury confirms, “use video ads.”

Sarah Hall of Lonely Persona backs this point, “video remains king — getting far more impressions than a static ad traditionally does.” There are a couple of strong reasons why video is ‘king’ as Hall calls it.

For one, Woodbury outlines, “Facebook allocates more of its ad space to video than to any other type of media. There are also less advertisers using video ads. This combination of decreased demand and increased supply makes for a meaningful decrease in CPMs.”

Secondly, Odeh Ahwal of EcomDimes notes: “video views objective is relatively cheap comparing to other campaign objectives.”

What’s more, by collecting “video views, shares, likes, and comments” you can also build social proof as Ahwal remarks. With a video campaign, you can also “build custom audiences for people who have watched a specific % of the video. (People who have watched 90% of the video are more interested and engaged than those who’ve watched 10%)”

Whether you choose to experiment with videos or not, a good rule of thumb to remember is making sure “your creatives are sized appropriately for post, story, various audience network specs, etc.,” according to Hall.

10. Add a CTA

In case you forget, including a call-to-action or a direction for what viewers need to do after seeing your ad is crucial.

Microcredit Summit’s Kimberly Porter shares this from experience, “we use Facebook ads often and have recently been working on reducing our CPM while improving our ROI. One of the ways we’ve optimized our CPM for Facebook ads is to include a call to action.”

Porter admits, “this seems like such a simple pivot for an ad, but it has really made a big difference on the number of people who engage with our ad. Selecting ‘Learn More’ or ‘Sign Up’ works best when promoting our content.”

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The reason this works is simple: people sometimes need reminding. Porter adds, “I think sometimes people will just skim the post, so encouraging them to click a button helps them remember we are actually offering them useful information.”

11. Work on your ad time and frequency

One last tip to bear in mind: “frequency and time,” according to ResumeLab’s Bart Turczynski.

The goal is to “make sure that the same audiences aren’t seeing the ads multiple times a day.” Not only is that “a waste of money” but it also ruins “brand perception” in front of your audience.

Wondering why? Because repeat ads can “start looking spammy and annoying,” Turczynski observes.

Sanket Abhay Desai of ITS ONLINE MARKETING goes into the same details: “I optimize my campaigns for CPM by using Frequency Capping. I make sure that I do not overwhelm my audience with ads. I do that by implementing frequency capping, which ensures that I do not show my ads more than 3 times to a specific user. I also use optimized images and creative ad-sizes, so that I get maximum reach and coverage.”

You can follow suit. Besides, as Turczynski advocates: “ensure that you set the hours for when your target audience is most active and present on the platform to maximize your ROI and lower the effective CPM.

Finally

There are many social platforms and search engines that offer CPM advertising services today. Whether you’re using Facebook or Google, remember to:

• Target the right people: Refined targeting and segmentation will ensure you’re only spending money on relevant leads.
• Watch the frequency levels: Focus on making sure the same people don’t see your ad more than 3 times.
• Use attention-grabbing copy and visuals: Make sure people remember your brand after they’ve seen your ad.
• Add social proof: Convince your audience that you have something useful to offer with an influencer endorsement or quote from a satisfied customer.