What is CPM Advertising?

October 8, 2015

By October 8, 2015insights
cpm advertising

For years, Google has helped advertisers promote their businesses with their cost per click (CPC) advertising model. However, advertisers should not forget they also have the ability to do cost per thousand views or CPM advertising.

While I would not encourage anyone to switch completely from CPC to CPM advertising, it can be a good addition to your current AdWords strategy to incorporate CPM ads and campaigns. Using the two formats together can produce better results.

So, what is CPM Advertising?

As we stated above, CPM stands for cost per thousand impressions. Simply put instead of paying Google or other advertisers for every click you receive to your website, you pay them for ad impressions.

The payment model is based off of every 1,000 impressions to your ad. If you receive 1,000 clicks to your website from 1,000 impressions your cost does not change. However, if you get no clicks your payment also stays the same.

It is one of the biggest benefits and drawbacks of using a CPM advertising model, plus one of the reasons we want to go over some benefits below of how to maximise your CPM campaigns.

Three Benefits of using CPM Advertising

Viewable impressions – Google recently made a change to their algorithm to ensure that 100% of their impressions for CPM ads are viewable. A few years ago, this was not the case. Many advertisers left Google, because of the fact that so many of their ads were on the page, but not in view of the user.

However, Brad Bender from Google stated, “I’m pleased to announce that GDN is moving to 100% viewable. We’re going to migrate all of the CPMs in the system to viewable CPMs. All advertisers will be able to see viewable metrics so they can make better decisions.”

According to research, 56% of online display ads are not viewable. As you can imagine this causes a lot of problems for Google advertisers. If 50% of the ad money you pay for is not even seen by prospects, your conversion rate does not stand a chance.

That lines up with a case study done by Luna Metrics last year. They found that their conversions on Active Views was a lot higher, and in some cases the comparison between active and regular impressions was greater than two to one.

This could be a game changer for businesses that use CPM ads now. Because many companies still shy away from them, due to past problems with active impressions there could be easy pickings at the moment.

Enhanced Audience Insights– Furthermore, Google has been working on improving their audience insights. One of the biggest reasons advertisers use CPM ads is to extend the reach of their marketing budget.

Therefore, it makes sense that Google enhance their audience insights as well. Google tweaked their analytics to improve the demographic, interests, location, and device usage information they provide to advertisers.

Now you can use this information to track larger ad audiences with a good CPM campaign. Like we mentioned before, CPM ads can be cheaper ways of reaching a larger audience. With General Display ads are hovering around $1.90, it provides a lot of potential to reach prospective clients.

These ads become a test to ensure that the targeted ads hit the mark with prospects. At the same time, you still have the opportunity to connect with prospects.

However, this only works well when it works in tandem with CPC ads. After you have a targeted audience in mind, you can convert them with targeted CPC ads.

Brand Awareness– The traditional reason Google mentioned that advertisers use CPM is for brand awareness. While brand awareness in the traditional sense is close to useless, it can help in one specific regard.

Going off the previous point of using CPM as a test for CPC is similar to using retargeted ads to bring in more business.

That is because trust in the brand is important when someone buys. That happens over time. Therefore, having an initial campaign where you use multiple CPM ads as a test to increase brand awareness and determine the highest CTR for ads could be an invaluable step in building long-term value.

One additional note here when running CPM ads. Make sure you cap the number of times a viewer can see your ad in a day. The idea is to spread awareness, not annoy and bully someone into buying your products. Optimising recency & frequency to the optimum levels is a critical component in conversion rate optimisation.

Plus, studies have shown that repeated views in one day by a user tend to get ignored. That is why you want to cap the number of words they see in order to ensure you get the highest click-through-ration (CTR) possible.

Otherwise, if you do not your ad budget could be wasted on indecisive people visiting a page more than once. 

Final Thoughts

Is CPM advertising the answer to all of your Google AdWords prayers? Probably not. However, if you incorporate Google CPM into your current advertising mix you can use it to vastly improve your marketing efforts.

With the new audience insights and viewable impressions, Google has made tremendous strides in creating a system that can help marketers receive the full benefit of CPM advertising.

If you have any questions or are still unsure as to what CPM advertising is or how to incorporate it into your own Google marketing mix please feel free to give us a Shout!