What is cost-per-impression (CPM)?

Cost-per-impression (CPM) is a common pricing model used in online advertising, where advertisers pay for every 1,000 impressions of their ad. Here's a detailed explanation of CPM:

### Definition:

Cost-per-impression (CPM) refers to the cost an advertiser pays for every 1,000 impressions (views) of their ad. An impression is counted each time an ad is shown on a webpage, regardless of whether it is clicked or not.

### Key Points to Understand:

1. **Impression**: An impression is registered each time an ad is fetched and appears on a user's screen. It does not require any interaction from the user.

2. **Pricing Model**: CPM is a type of impression-based pricing model, where advertisers bid on the cost they are willing to pay for 1,000 impressions of their ad being shown.

3. **Calculation**: CPM is calculated as:
   \[
   \text{CPM} = \frac{\text{Cost of Advertising}}{\text{Number of Impressions}} \times 1000
   \]
   For example, if an advertiser pays $2.50 CPM, they are paying $2.50 for every 1,000 impressions of their ad.

4. **Uses**: CPM is commonly used in display advertising, where advertisers want to increase brand awareness or visibility. It is also used in video advertising (vCPM, where "v" stands for viewable impressions) to measure viewable impressions.

5. **Billing**: Advertisers are typically billed based on the number of impressions their ad receives, regardless of whether users interact with the ad or not.

### Factors Affecting CPM:

- **Ad Format**: Different ad formats (e.g., display banners, video ads) may have varying CPM rates.
 
- **Ad Placement**: Ads placed on premium or highly targeted websites or placements may command higher CPMs.

- **Audience Targeting**: Targeting specific demographics, interests, or behaviors can affect CPM rates.

### Benefits of CPM:

- **Brand Awareness**: CPM campaigns can help increase visibility and exposure of a brand, as ads are shown to a broad audience.

- **Predictability**: Advertisers can forecast costs more accurately based on expected impressions.

### Limitations:

- **Engagement Uncertainty**: Unlike CPC (cost-per-click), CPM does not guarantee user interaction with the ad, so advertisers must rely on other metrics (like click-through rates or conversions) to measure effectiveness.

- **Viewability**: In video advertising, there can be discrepancies between billed impressions and actual viewable impressions, affecting campaign performance.

### Conclusion:

Cost-per-impression (CPM) is a widely used pricing model in online advertising, particularly in display and video advertising campaigns. It allows advertisers to pay for ad visibility and brand exposure, making it suitable for campaigns focused on increasing awareness and reach.