General Question

noly's avatar

How do advertisers calculate cost per impression?

Asked by noly (227 points ) July 12th, 2011

I’m about to launch a new website and I have to submit my business plan to get more funds. I know how many users I can expect and I know I will make money with banner ads but I have no idea of how to calculate CPI( Cost per impression) or CPM ( Cost per mile). I read on comscore.com that the average CPM for the US was 2,43 USD. When someone says something like, “our CPM is $5” how did he get that number?

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5 Answers

WestRiverrat's avatar

I think in this sense, CPM stands for cost per thousand not cost per mile.

We do direct marketing.

To calculate cost per thousand, take the cost of all the materials that went into a mailing and divide by the number of packages created by those materials. We take the resulting number and multiply it by 1000 to come up with the CPM.

noly's avatar

@WestRiverrat, I don’t understand. Lets say I run a website with 1 million user. How do advertisers will know the CPM of my website?

vanguardian's avatar

Impression is simply how many times the banner is shown.

Cost per impressions is determined by you. You control how many impressions a banner will have. You set the price. Divide the two. Let’s say you have tiered avertising rates and one level is $100/month for 50,000 impressions that would be $.002 per impression. Static banners are a fixed price based on size.

CPM is Cost per Mile but in media advertising it’s referred to Cost per Thousand. It can be broken down into different demographics, total users, active users, etc. For your sake let’s just say you have 25k total members/users on your site. Divide that by 1,000. Total is 25. Now let’s say you are charging someone $150/month for a banner on your site. Divide the $150 by 25. Your CPM is $6.00.

Not sure if this is what you were looking for.

kaiharris's avatar

Cost Per Thousand, or CPM, is a tool that advertisers and media buyers commonly use to compare different advertising media, leveling the playing field between them. Communication strategy under which an organization attempts to use all of the promotion tools it has available to present a unified, consistent, clear, and coherent image/message to customers.

tomalarm's avatar

Like kaiharris said CPM is a measure to compare different types. For example AdWords text ads are CPC (cost per click) based, while banners are usualy CPM (cost per thousand) based. So you can calculate other media data into CPM to compare.

Perhaps more preffered comparison vould be by cost per one conversion or ROI.

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