CPM (Cost-per-Mille or Cost-per-Millennium) is a payment model for advertising, where the advertiser pays for every 1000 impressions of an ad or banner. The essence of CPM is that payment is made regardless of whether the user interacts with the ad or not. If a person visits the website and simply sees the ad, payment is deducted. Thus, CPM differs significantly from the CPC model, where payment is made for clicks on the ad, and from CPA, where the advertiser pays for a completed target action.
To calculate the CPM, you need to know two indicators: the amount spent on advertising and the number of views. Let's say you spent $200 on advertising and received 4900 views. To calculate CPM, you need to divide the advertising budget by views and multiply by 1000 impressions. In our case, CPM will be $40.8 — this is how much the advertiser paid for every thousand ad impressions.
The CPM model is used by companies that launch advertising to increase audience coverage and tell as many people as possible about themselves. For example, this approach can be useful when a company enters the market, launches a new product, or notifies the audience about a promotion. In these cases, the task of advertising is to increase recognition, so the number of impressions is important. However, CPM is only suitable for businesses with a large advertising budget because if you place an ad on a popular website, impressions will accumulate very quickly.