The CPM is one of the most important metrics to follow in your paid media campaigns. You must always keep an eye on your CPM, along with the ROAS, the revenue, and the conversion rate.
However, as opposed to the other metrics, the CPM can be rather volatile. The metric can be influenced by many factors, starting with the platform on which you choose to place an ad, the geolocation, the seasonality, etc.
In this article, we have listed and analysed 8 factors that influence your CPM. Enjoy the reading.
What is CPM?
As a reminder, CPM stands for Cost per Thousand Impressions or Cost per Mille.
The CPM in calculated as following: CPM = (Total Ad Revenue/Total Impressions) * 1000
To put it even more concretely, the CPM determines how much an advertiser has to pay for its ad or banner to be seen by 1,000 Internet users.
Sounds easy, doesn’t it? It’s not quite.
In a perfect advertising market, the CPMs would be low and everyone would reach exactly their target audience. In reality, things are a little different.
As mentioned, the CPM is influenced by many factors, some under the direct control of the advertiser, and some that aren’t as easily manageable. We have managed to find, categorise them and give you the best advice as to how to maintain low CPMs.
8 factors that affect your CPM
1. Supply and demand
Does your product or service abide by the law of supply and demand in advertising?
Okay, I’ll make it less theoretical: is there an ad space available for the product you are selling?
In digital marketing, advertisers have a demand for publishing space, where they can place their ads (also called creative assets).
This demand is impacted by macro (economic stability) and micro (demand, product attractivity) economic factors.
The supply is therefore represented by places (websites, or feed in this matter) where those assets can be shown. The supply is also called Inventory.
Any company that has a product or a service to sell and is interested in digital marketing makes part of the demand. The same principle applies for those who provide the supply.
So where does the CPM stand in relation to these factors?
Every advertiser wants to place his product on a website that his potential customers frequent. The issue is, in a busy market, he won’t be the only one. The more advertisers try to bid on the same inventory spot, the more expensive it will become, hence influencing the CPM.
This problem also depends a lot on seasonality, which is explained in the section below.
Your CPM tends to increase in certain periods of the year. Retailers bid hard to win traffic around these periods:
- Holidays. The gift buying season is definitely going to spur your CPMs up, especially around major holidays such as Christmas, Easter, Valentine’s Day etc.
- Sales. The two major sales waves (winter and summer) make advertisers invest more into their campaigns. Using discounts, they are able to get rid of stocks and make place for new items or collections.
Seasonality is hard to make sense of or try to control. Every advertiser is going to bid around those times of the year to try to sell their products. The best thing you can do is foresee these seasonality peaks and grant the correct budget to your campaigns, so you can make sense of those numbers.
3. Choice of advertising platform
Your CPM is going to be influenced by the social platform you place your ad on. Your CPM will vary, from most expensive to least on the platforms as following:
This is however bound to change. Keep in mind that Facebook and Instagram are already the reference platforms for placing ads, however, TikTok is rapidly growing. The balance of forces might soon switch.
Kind reminder that you should be on the platform that best corresponds to your audience, not where the hype is.
4. Audiences size
If you want to advertise to everyone, your CPM is going to be low. But, you won’t reach the right people, your conversion and sales rates will be very low as well, and the most you will get for so little money is frustration.
The more your target audience is precise, the more your CPM will increase. Audience restrictions that influence your CPM are:
- geographic location
However, targeting the right audience will make your ads be seen by your ICP’s (ideal customer profile) which will increase your sales.
5. Campaign target
Your CPM is influenced by your campaign target. The question to ask yourself is what do you want to achieve through your campaign?
There are three types of campaign targets, with a funnel like organisation.
On the top of the funnel, your campaign target will be Awareness. What you want to get from that campaign is brand awareness and reach.
In the middle of the funnel, your campaign target is Consideration. There are plenty of variables you can target in this category: traffic, engagement, app instals, video views, lead generation etc.
At the bottom of the bottom, your campaign will focus on Conversion. What you want to get is obviously conversions, catalogue sales, store traffic, etc.
The CPM will be lower for top-funnel targets and will increase the more you try to fix on bottom-funnel.
We recommend you focus on doing a mixed focus, depending on the seasonality and your targets, so you can maintain a fairly stable CPM.
Your CPM is directly influenced by how developed the online industry is in the country you’re targeting. The relationship between high value CPM is therefore directly proportional to the power of the online industry.
Another geographical factor that influences your CPM is the spending power of the population in the country you are targeting. Germany, the United States, France, or the UK will generate higher CPMs, therefore the bidding will be more aggressive.
7. Creative efforts and Ad format
Video gets more attention than static. It’s a fact. More attention means more impressions, which will automatically lower your CPM.
As a general rule, make sure your ad, static or not, corresponds to the correct format and size.
There is also the matter of quality when it comes to ads. If your creative asset doesn’t correspond to decent graphics and doesn’t convey a good message, then your audience will often report it, which will lower the ad quality.
Choice of device can influence your CPM, depending on what your audience is prone to use. Conversion rates are still a little lower on mobile compared to tablet or desktop.
To conclude, measuring your CPM and retiring most of that data can be a challenge, given all the factors that can be taken into account.
Nonetheless, this metric helps improve your campaigns and with a good repartition of your budget, it can be proven a most useful tool.