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The immortality of CPM

The immortality of CPM

For many publishers, the term CPM sends a chill down the spine; for others, it just brings confusion. That’s partially because CPM means cost per thousand impressions, but stands for cost per mile — which can only be explained by the fact that the digital advertising industry was created by a secret band of underground truckers enslaved by Steve Jobs’ mind-control powers.

…I’m being told that’s not true, and that “mille” is the Latin word for “thousand.” Still, it’s confusing.

That whole use of Latin highlights the fact that CPM isn’t a new measurement. It’s actually a relic of traditional TV advertising, in which TV stations would charge advertisers for commercials based on how many viewers watched the show. If they were charging a $100 CPM and got 10,000 viewers, they’d charge $1,000.

Likewise, print magazines and newspapers charged CPM rates based on their readerships.

Uptake of CPC

The digital age brought the first opportunity to break away from the CPM model. Instead of paying publications based on how many people see an ad, marketers suggested that we could just pay publishers based on how many people click on an ad. That line of thinking gave birth to CPC (Cost Per Click) and CPA (Cost Per Sales Acquisition), which take advantage of the deeper data that the Web provides.

For years, CPM detractors argued that display ads should be sold via CPC because clicks translate into demonstrable intent. But Publishers were not too keen on CPC pricing, especially since the click-through-rates (CTR) for early banner ads were atrocious. And the publishers were right. Clicks haven't proven to be a great way to measure intent.

A 2012 comScore research study found that "ad viewability and hover time are more strongly correlated with conversions (defined as purchases and requests for information) than clicks or total impressions." Put another way, display campaigns can be very effective, even though the vast majority of users will never click on an ad.

CPM to become even more valuable

CPM certainly seems here to stay. Indeed, instead of getting rid of it, the industry has developed metrics that bolster it, like ad viewability and view-through attribution, which makes it possible for advertisers to know which visitors to their sites have seen one of their display ads. Both of those metrics are also playing a role in reducing the importance played on “clicks.”

Perhaps what makes CPM attractive above all else is that it aligns with traditional advertising so well — after all, you can't click on a magazine ad, but no one denies those ads have value. The growing understanding that online display ads have far more value than the number of clicks they produce is leading to a steadily-growing budget flow into digital. For that reason, more than any other, CPM may be immortal.

Ben Plomion

Ben Plomion

Ben is VP of Marketing at Chango, where he heads up marketing and is also responsible for expanding the company’s data and media partnerships. Prior to joining Chango, Ben worked with GE Capital for four years to establish and lead the digital media practice. This led to the development of GE Capital’s digital value proposition and its execution worldwide. The new venture re-energized paid, owned and earned media across 70+ web sites. Ben graduated from GE’s Experienced Commercial Leadership program after completing his MBA at McGill University. Before GE, Ben held a variety of Marketing & Business Development roles in the e-payments industry, while working at Gemalto in London. 

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