What CPM is
CPM is the cost per thousand impressions (the M is the Roman numeral for 1,000). It is how most display, social and video advertising is priced and compared: $500 for 100,000 impressions is a $5 CPM. Because it measures what it costs to be seen, not what it costs to get a result, a cheap CPM is only good news if the people seeing the ad go on to click and buy.
The formulas
- CPM = cost ÷ impressions × 1,000
- Cost = CPM × impressions ÷ 1,000 — what a planned number of impressions will cost
- Impressions = cost ÷ CPM × 1,000 — how far a budget goes at a quoted CPM
- CTR = clicks ÷ impressions; CPC = cost ÷ clicks
- Conversion rate = conversions ÷ clicks; CPA = cost ÷ conversions
Reading CPM against the rest of the funnel
The metrics chain together: CPA = CPM ÷ (1,000 × CTR × conversion rate). Halving your CPM and halving your CTR leaves CPA where it was, which is why comparing channels on CPM alone misleads. In the example above, a $5 CPM, a 1.5% CTR and a 3% conversion rate produce an $11.11 CPA. Whether that is good depends on what a customer is worth: check it against your break-even CPA in the ROAS calculator.