CPM, an Advertising Metric: Calculation Method, Definitions by Media, and Differences from RPM, CPM, CPC

Are you interested in learning about the CPM advertising metric?

Advertising metrics such as CPM, CPC, and CPA can be confusing with their similar terms.

CPM is a unit used to indicate the cost-effectiveness of web advertising placement fees.

It is also a term used in the billing system for internet advertising, making it an essential metric for advertising operations and web marketing.

In this article, we will explain “CPM,” a commonly used metric for advertising delivery using networks such as pure advertising and ad networks.

What is CPM?

CPM refers to the cost per thousand impressions (cost incurred when an ad is displayed 1,000 times) in web advertising.

CPM is an abbreviation for “Cost Per Mille,” with “Mille” meaning thousand in English.

Its origin comes from the Latin word “mille,” meaning “1,000,” so the reason CPM represents the cost per 1,000 impressions is apparent.

Additionally, during advertising operations, there is a billing system known as “CPM rate (impression rate),” where charges occur every time the ad is displayed 1,000 times.

Calculating CPM

The cost-effectiveness of CPM can be calculated using the following formula:

• CPM = Cost of the ad ÷ Number of ad impressions × 1,000

For example, if you spend ¥200,000 on an ad, and it receives 400,000 impressions, the calculation would be “¥200,000 ÷ 400,000 impressions × 1,000 = ¥500.”

In this case, the cost per 1,000 impressions is ¥500.

The higher the number of impressions, the lower the CPM.

CPM (Impression Billing) Rate Range

The CPM rate range is approximately “¥10 to ¥500.”

For example, if you want 10,000 impressions for an ad with a CPM rate of ¥500, you can estimate the cost with the following calculation.

According to this formula, the required cost in this case would be ¥50,000.

Of course, this can vary significantly depending on the media where the ad is placed.

Keep in mind that it can vary greatly depending on advertising methods and distribution channels, ranging from less than ¥10 to several hundred yen.

Additionally, CPM and impression definitions may differ depending on the media, as we will confirm in the next section.

Since this information is relevant to costs, those involved in advertising operations should definitely find it useful.

What is ‘eCPM,’ a Measure of Advertising Cost Performance?

Similar to CPM, there is a term called eCPM.

eCPM is an indicator used to measure the cost performance of advertising by replacing non-CPM billing with CPM.

The “e” in eCPM comes from “effective,” indicating the practical or actual nature of the metric.

eCPM is used to easily compare the performance of different advertising billing methods such as CPC, CPA, and CPM when considering advertising costs.

In other words, by calculating eCPM, one can measure the cost-effectiveness of advertising, allowing an understanding of whether the advertising billing system is appropriate.

Calculation Method for eCPM

The calculation method for eCPM is similar to CPM and can be determined using the following formula:

• Ad Cost ÷ Number of Ad Impressions × 1,000imp = eCPM

For example, if you are currently running a CPC-billed ad with a click cost of ¥50, and out of 2,000 ad impressions, it gets clicked 20 times, the ad cost would be ¥1,000.

In this case, the eCPM is ¥500.

¥1,000 ÷ 2,000imp × 1,000imp = ¥500

By comparing the calculated eCPM with the unit cost when using CPM billing, one can determine which billing system has a higher cost-effectiveness.

Definitions of CPM by Media

To further understand CPM, this section introduces the definitions of CPM and the definitions of counted impressions for each advertising medium.

We have compiled the definitions of CPM and the definitions of counted impressions for the five commonly used media in web advertising.

While the definitions of CPM are mostly similar, the definitions of counted impressions can vary significantly depending on the media, so please refer to the details.

As can be seen from the table above, the definition of CPM varies by advertising medium.

However, there are common points, and impressions are counted for any advertising medium when the ad is displayed on the user’s device screen.

This is called a viewable impression, and the mechanism of impression billing counting only viewable impressions is referred to as vCPM.

Next, we will explain vCPM in the following section.

However, depending on the medium, there are cases where impressions are counted even if the ad is not displayed on the screen.

In such cases, impressions are counted even if the ad is not displayed on the screen, resulting in unnecessary impressions and ultimately higher CPM.

Since incurring costs for unnecessary impressions is not favorable for advertisers, vCPM was introduced to achieve more cost-effective advertising operations.

What is vCPM?

vCPM, or “Cost Per Mille for Viewable Ad Impressions,” is a billing system based on the cost per 1,000 ad impressions that are deemed viewable by users.

Google defines viewable ad impressions as follows:

An ad is considered in the “viewable range” if 50% or more of the ad area is displayed on the screen, and for display ads, there is a display of 1 second or more, and for video ads, continuous playback of 2 seconds or more.

Reference: About viewable impression cost – Google Ads Help

In other words, if a user navigates to another page before more than 50% of the ad is visible while viewing a website, it won’t be counted as an impression.

Though both concepts are similar, understanding the differences helps in choosing the appropriate billing system.

For instance, if the goal of advertising is to “have many users see the ad,” using the “Cost Per Mille for Viewable Ad Impressions (vCPM)” setting is effective.

Calculation Method for vCPM

The calculation method for vCPM is similar to CPM, and it is determined by the following formula:

While the calculation methods for CPM and vCPM are similar, the numbers obtained are different due to the difference in billing definitions.

Differences Between CPM, CPC, and CPA

Next, we’ll explain “CPC” and “CPA,” which are advertising metrics similar to CPM.

These advertising terms are used with two meanings: ‘Advertising Cost’ and ‘Advertising Billing System.’

It might be a bit confusing, but understanding the differences from CPM we learned earlier will help you grasp the basics of advertising operations.

The definitions for each are as follows:

As mentioned earlier, while CPC represents the cost per click, CPM represents the cost per 1,000 ad impressions.

In terms of billing systems for advertising, the definitions are as follows:

The appropriate billing system depends on the purpose of advertising.

Consider which billing system is suitable based on the purpose of your ad campaign.

While you might understand the differences, some may wonder, ‘What are the advantages and disadvantages of CPM billing?’ In the next section, we’ll explain the benefits of CPM billing.

Feel free to refer to it for efficient ad operations.

Advantages of CPM Billing (Impression Billing)

The advantage of CPM billing is that you can operate your ads while keeping costs low, “regardless of how many times the ad is clicked.”

In the case of CPM billing, costs are incurred every time the ad is displayed 1,000 times, so it does not affect the final cost even if the cost per click or click-through rate is high.

In other words, if it’s an ad with a high click-through rate and expected clicks, the unit price becomes more affordable.

For example, if the cost per click and impression cost are both 100 yen, with a click-through rate of 0.3%, and a total impression count of 10,000:

Using CPM billing would allow you to operate ads with lower costs.

In such cases, choosing CPM billing is recommended.

Effective ad operation involves minimizing costs while maximizing profits.

Disadvantages of CPM Billing (Impression Billing)

In CPM billing, there is a potential disadvantage that “costs may be incurred even with a low click-through rate, leading to poor cost-effectiveness.”

In other words, even if the ad is displayed without being clicked, and there is no traffic to the web page, costs will still be incurred.

While this is extreme, if the cost per click and impression cost are both 100 yen, and both have a click-through rate of 0.01%, with a total impression count of 10,000:

Using CPC billing would result in lower costs for ad operation.

If the unit prices and impressions for both CPC and CPM are the same, when the click-through rate falls below 0.1%, CPC billing becomes more cost-effective.

While the basic content of CPM has been covered here, the next section will explain “eCPM” and “vCPM,” which are terms you may want to know alongside CPM.

What is RPM?

Similar to CPM, there is another term called RPM.

RPM is an indicator that represents the revenue per 1,000 ad displays (1,000 imp).

While CPM represents costs, RPM represents revenue, so the target audience for these indicators differs as follows:

CPM and RPM have very similar words and meanings, but there is a clear difference.

It might be a bit confusing, but if you operate a blog or YouTube channel and are not registered with Google AdSense, you generally won’t use RPM, so it’s enough to remember it as trivia.

Summary: Understanding Advertising Metrics and Billing Systems for Effective Ad Operations!

With many similar terms in advertising metrics and billing systems, it’s understandable if you’re feeling overwhelmed.

However, the advertising metrics introduced here are important regardless of your career in advertising operations.

Therefore, be sure to grasp the meaning and calculation method of CPM introduced here.

By understanding advertising metrics and billing systems, you can conduct appropriate operations.

Start by using this article as a reference and try calculating the CPM or eCPM for the ads you are running in-house.

If, after reading this article, you are unsure which advertising billing system is best, seeking the services of an advertising agency is also an option.

Advertising operations have become increasingly challenging year by year due to legal changes and updates to media.

Especially for small and medium-sized enterprises, there is a current shortage of dedicated personnel for advertising operations, and cases where it is handled in conjunction with other duties are common.

As a result, many companies continue to operate with poor cost-effectiveness, unable to effectively manage advertising operations.

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If you are even slightly considering “leaving web advertising operations to an agency,” feel free to consult with us.

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