The Defintion of CPM
CPM in advertising stands for Cost per 1000 impressions. M is the latin symbol for 1000. (Lately I’ve noticed some people mistakenly using it to represent a million, but the correct symbol for that is MM which is 1000 times 1000 or 1 million.) CPM rates are most often applied to display advertising, where the publisher is paid a set fee for every thousand impressions on a page.
CPM and Site Traffic Considerations
For publishers you have to be careful of a few issues related to CPM rates. First, if you have high traffic on your site with low engagement, this might be the best way for you to place ads on your site, since it relies on high traffic rates. However, if you have a smaller site with high engagement, you’ll probably find that a text based ad that pays on a CPC basis is probably more profitable. Part of the decision will depend on the value of your page’s primary keywords.
Text based ads often have better engagement because of a phenomena known as Ad Blindness, where users fail to identify advertising images surrounding their content. Only 14% of users can remember the last banner ad they saw, according to a study in 2013.
CPM Rates and Interstitial Placements
Another issue when it comes to CPM pricing when you’re beginning, is that some advertising groups will try to give you a low CPM advertising rate for an interstitial placement, especially on your front page. The problem with that is that many people are put off by interstitials, since they get waylaid from where they wanted to go. Instead of being able to go to your front page, something blocks them. This will often make them abandon your site altogether, and there aren’t many ads that are worth that sort of terrible (UX) User Experience.
A Sample CPM Calculation
So be careful how many ads you place on your site. You want to give your users the best possible experience with the most relevant content possible. Just remember that with CPM you’ll get paid each time someone looks at your website but it’s a few per one THOUSAND views… so with a CPM of $2.34 you would receive $2.34 after users landed on your pages 1000 times. If they land on your pages 2000 times, you would receive $4.68. That is why traffic is so important with CPM advertising placements.