How To Calculate Cost Per Impression: A Step-By-Step Guide

Updated 29 September 2022

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Cost per impression (CPM) is a crucial metric for assessing the effectiveness of marketing initiatives. With any advertising campaign, monitoring CPM helps determine whether you are getting an ideal return on investments (ROI) from marketing expenses. If you work in sales, marketing, business or a related field, you might find it useful to learn how to calculate this expense and use it to assess the return on investment. In this article, we define per impression cost, describe how it differs from page view and cost per click (CPC), list instructions for computing it and provide tips to decrease your CPM.

What Is The Cost Per Impression?

Cost per impression (CPI) or cost per mille (CPM) is a metric that helps calculate the amount of money a business is likely to pay for 1,000 impressions or the cost associated with each prospective buyer who sees the advertisement. Industry, demographics, location, season, site content and its relevance to the ad, site traffic, ad quality, the device on which an ad may appear, the number of ads on a page, and the time of day are all factors that affect the CPM rate.

A CPM pricing model can be beneficial for identifying ads that generate more conversions, ensuring higher ROI, comparing the cost-effectiveness of various advertising media, planning changes for new marketing campaigns, determining the performance of previous ad content, and optimising digital marketing strategies to reach target audiences. CPM is a useful metric for marketers that enables them to assess the effectiveness of their promotional channels and identify the best-performing channel for their company. Advertisers can speak to the right audiences by placing ads on relevant websites. This increases the effectiveness of their campaigns and raises consumer awareness of their brands.

Difference Between Page View And Impression

An impression is a single view of an advertisement. Each time a user sees an advertisement, it gets recorded as one impression. Contrarily, page views occur when a user accesses a company's website. Page views represent actual and deliberate user engagement with a website's content, making them more active than impressions. Even if a person typically clicks on a page voluntarily, they have no control over what they see, so impressions can be a less reliable indicator of user interaction and intent.

Multiple advertisements may appear on a single web page. A single page view, in such cases, counts as one impression for each ad displayed. An ad server may exclude certain non-qualifying activities, such as page refreshes or other user actions, from counting as impressions to ensure recording the correct impressions and avoid miscounting. Impressions can also be useful to determine the reach of an ad, and page views are helpful to determine the popularity of a company's social media page, website or other profile.

Difference Between Cost Per Click And Cost Per Impression

CPM and CPC are two methods for pricing website ads. While CPM refers to the cost of displaying an ad, cost per click (CPC) or pay per click (PPC) refers to the cost of each customer who clicks on an ad. Because CPC focuses more on user activity, marketers only pay for ads based on the amount of user engagement. Companies are not required to pay for advertising space if website visitors do not click on the offered ad and the campaign does not deliver the expected results. This can be more lucrative for a business because it involves less risk.

CPM, on the contrary, can be a better indicator of an ad's reach than CPC. CPM is more concerned with disseminating an ad to a large audience, where seeing the ad is more important than taking action. When launching a new product, service or project, businesses may benefit from using CPM rather than CPC. This is because they may want to know how many people saw their advertisement and learned about their offer. It can assist them in measuring critical metrics, such as brand awareness and recognition.

How To Calculate Cost Per Impression

CPM's pricing model enables marketers to select a plan that meets their objectives and budgets. Here is how to figure out the per-impression cost:

1. Find your total ad spending

Calculate the amount of money you spent on impressions during a specific time frame. It can be over a day, a week, a month, a quarter or the entire year. Analysing your marketing department's expenses is essential for determining how successful your strategies are.

2. Determine the number of ad impressions

Next, figure out the total number of impressions for which you paid. Usually, you get to know this when you first complete the transaction. You may also collect impression information by using analytics software.

3. Use the CPM formula

After collecting the required information, divide the total amount you spent on an advertisement by the total number of impressions you received from the ad. Then multiply the result by 1000 and there you have your per-impression cost. Here is the formula:

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

If you already know the CPM, you can also calculate the other two metrics from the same formula. Here is how:

Total ad spending = (Number of ad impressions / 1,000) x CPM
Number of ad impressions = (Total ad spending / CPM) x 1,000

After determining your average CPM, you can use this knowledge to guide crucial marketing choices. For instance, you might choose to increase or decrease the amount of money you put into creating digital content. You can also compare the CPM between various subgroups to assess the effectiveness of different content strategies.

Tips To Lower Your CPM

If you can lower your CPM, your ad can reach more people for a lower amount of money, ultimately increasing your ROI and, subsequently, company revenues. You can do this in the following ways:

Adjust audience targeting. Try to increase your ad relevance score so that the majority of your target users view the ad. A niche audience is going to be smaller, but if they find your ad relevant, it may lead them to rate your ad quality higher, which can help you lower your cost, engage with your campaign more and convert at a faster pace.
Set an optimum ad frequency. This helps ensure users recognise and can quickly recall your brand when required, but they do not see the same advertisement too many times repeatedly. Three times is typically the recommended frequency because if users do not interact with an advertisement after seeing it a fourth time, it may not be relevant to them.
Use compelling images and ad copy. Adding attractive images and including a message that appeals to the target audience can help convert more of your impressions into leads. Change the images regularly and subtly update your copy every few weeks to keep the advertisement engaging for current audiences.
Utilise social proof. When a reputable third party, such as other customers, celebrities, or opinion leaders, makes claims in advertisements, people are more likely to believe them. By shifting the onus of trust from the business to individuals whom the audience already respects, social proof ultimately boosts engagement and conversions.
Implement search engine optimisation (SEO) strategies. Your ad may receive free impressions in search engine results if you incorporate SEO into your content marketing strategy. This implies that a much larger audience sees your advertisement when conducting related web searches.
Create special offers. Offering a deal people find hard to refuse, like a significant discount or a free trial, can help engage users and draw them to a business. If you want to create a better offering that gives the ad viewers value, research your competitors' offerings.
Add a call to action (CTA). Clearly state what users can do next to prevent them from skimming the advertisement and encourage them to commit to the message. CTAs encourage users to interact with the brand and take actions that can turn them into leads.
Employ A/B testing. By simultaneously running different versions of the same ad and comparing elements like headlines, text images, copy, CTAs and other elements, A/B testing enables you to identify which ads perform well and which do not. As you improve your advertisements over time, their performance improves, the rankings rise and your CPM subsequently declines.