What is CPM in Paid Advertising? When to Use, How to Optimize CPM Ad Campaign for Optimum Impression

What is CPM in Paid Advertising? When to Use, How to Optimize CPM Ad Campaign for Optimum Impression

June 4, 2024
CPM (Cost Per Mille) is an online ad pricing model where advertisers pay a set amount for every 1,000 impressions of their ad. An impression is counted each time an ad is displayed to a user, regardless of whether it is clicked. This model is beneficial for advertisers looking to control their budget effectively, as it allows for predictable spending and easy scaling of campaigns. It is particularly useful for reaching a wide audience with a fixed cost per thousand views.

Platforms: Frequently used on display networks like Google Display Network and social media platforms.

When to use CPM Ads?

CPM ads are great for brand awareness campaigns, when you want more people to know about your brand, services, and products. Although, it has potential to drive traffic & leads, but the target here is not to increase traffic, but to increase impression (no. of times your ad is displayed online to users).

However, don’t be confused with the 1000 impressions mark. When we say 1000 impressions, that doesn’t guarantee that your ad will be displayed to 1000 different individuals. The same ad can be displayed 1000 times to a single person. In such case, the ad campaign would be total flop.

Well, don’t worry! I won’t be pulling the earth from your feet, without giving you the solutions. Now, there are several strategies you can implement to ensure your ads are not being displayed several times to the same person. That means, there you can reduce the frequency of your ads being displayed to the same person. This method is known as ad frequency capping.

How to Optimize Your CPM Ad Campaign with Frequency Capping So it Reach Maximum People?

Set Frequency Capping
Through frequency capping, you can limit how many times a person sees an ad per day, week or in a month. It depends what frequency, and time you set in your day. If you choose 3 impression per day, then your ad will be displayed 3 times to a single user within 24 hours.

Use Cookie-Based Targeting
You can set cookies to limit ad impressions for a certain duration to a specific user. Now let me tell you how it works.

When a user visit a website that contains advertisement, the ad network’s tracking code or script gets executed within the user’s browser.

These tracking codes or script can set cookies, which are small pieces of data stored on a browser. The way a user interacts with an ad, including actions like ad impressions, clicks, or other behaviors specified by advertisers, is typically tracked and recorded by the ad network’s tracking mechanisms, such as scripts or pixels.

As an advertiser, you can the expiration date of the cookies. That means, setting how long the cookie can remain active on the user’s device. While setting expiration date helps you to track user interactions for a certain number of days, it also benefits you in configuring ad frequency. You can track these cookies to see how many times the user has seen a particular ad within a specific time, and then stop serving them the ad to eliminate overexposure.

Segment Your Audience
You can reduce ad fatigue by rotating your ads across different types of people. For that, you need to first segment your audiences based on various criteria such as demographics, interests, or behaviour. For example, if you run a fashion store, you can segment your audiences by “young professionals”, “sports enthusiast”, “seasoned gentlemen”, “elegant ladies”, and so on.

Once you choose your audience you can create targeted ads with unique messaging and assets. Once you create targeted ads, you can run them in rotating order, so that individuals from each segment are exposed to a wide range of creative messages rather than seeing the same ads repeatedly. This approach helps maintain user engagement and reduces the likelihood of ad fatigue. One way to limit overexposure is to schedule your ad campaigns at a time when your target audiences are most active. This requires you to go thr

Manage Ad Scheduling
ough some statistics and strategically place your ads at a certain time. If more audiences are online at the same time, this increases the chance of the ad getting displayed to more people.

Maintain an Exclusion Lists:
Maintain exclusion lists of users who have already converted or interacted with your ads. Exclude these users from future ad campaigns to focus your efforts on acquiring new prospects.

Difference between CPM and CPC in Paid Ads

Understanding the difference between CPM (Cost Per Mille) and CPC (Cost Per Click) is crucial for designing effective marketing strategies.

CPM (Cost Per Mille)

CPM stands for Cost Per Mille, where “mille” is Latin for “thousand.” Advertisers pay a set amount for every 1,000 impressions (views) of their ad. It is primarily used for campaigns focused on brand awareness and visibility. It’s an effective model when the goal is to get the ad seen by as many people as possible, rather than encouraging direct interaction.
Cost Structure: You pay a fixed fee for every 1,000 times your ad is displayed, regardless of whether users click on it.

How to Measure Success of Your CPM Ad Campaign?
You can measure your CPM success by the number of impressions your ad receives.

Advantages of CPM:
  • Predictable spending: Advertisers know exactly how much they will spend based on the number of impressions.
  • Broad reach: Ideal for increasing brand visibility and awareness.
When CPM Might not be The Best Choice?
Your ad may be seen, but there’s no guarantee users will interact with it. This makes it less efficient for direct response campaigns where clicks and conversions are the main goals.

CPC (Cost Per Click)

CPC stands for Cost per Click. In this ad model, advertisers pay each time a user clicks on their ad. It is commonly used for performance-based campaigns where the goal is to drive traffic, generate leads, or achieve other direct responses from users.
Cost Structure: You are charged each time someone clicks on your ad, making it a more interaction-focused pricing model.

How to Measure the Success of Your CPC Ad Campaign?
You can measure your CPC’s success by the number of clicks your ad receives, and by the click-through rate (CTR) and conversion rate.

Advantages of CPC:
  • Pay for performance: You only pay when a user interacts with your ad, making it cost-effective for driving specific actions.
  • Higher engagement: Typically leads to better user engagement since users who click are likely interested in your offering.
Limitations of CPC:
  • Variable costs: Costs can fluctuate based on competition and bid amounts for keywords or ad placements.
  • Requires active management: CPC campaigns often require more ongoing optimization to ensure efficiency and effectiveness.

Choosing the Right Model: CPC or CPM?

Campaign Goals:

CPM: Best for brand awareness, product launches, and campaigns aiming for maximum exposure.
CPC: Ideal for driving traffic to websites, generating leads, and encouraging specific user actions like sign-ups or purchases.

Budget Considerations:

CPM: More predictable spending, making it easier to control and allocate budgets for broader reach.
CPC: Budget can vary depending on the competitiveness of the keywords or placements, requiring more active budget management.

Target Audience:

CPM: Effective for reaching a large, broad audience.
CPC: Better for targeting specific, high-intent users likely to take action.

Note: CPM and CPC have their unique advantages and are suited to different advertising objectives. CPM is great for maximizing visibility and brand awareness, while CPC is more effective for driving user engagement and achieving specific performance goals.

Additionally, once you’ve succeeded in CPM and CPC campaigns and accumulated a significant amount of conversion data, transitioning to the Cost Per Acquisition (CPA) model can be advantageous.

In CPA campaigns, advertisers only pay when a user takes a specific action, such as making a purchase or completing a form. This model can lead to more streamlined outcomes and potentially reduce overall advertising costs, as advertisers are only paying for desired actions rather than simply impressions or clicks.

Conclusion

All the above methods are great for optimizing your CPM campaign, ensuring your ads reach maximum number of people. However, if you ask me, frequency capping is the best way to get your money worth from your CPM ad campaigns. For best results, you can set the limit to 3 impressions per user per day for Google Ads, 2 impressions per user per day for carousel ads in Facebook Ads, and for video ads, you can limit to 5-6 impressions per user per week.