Cost Per Impression is a phrase often used in online advertising and marketing related to web traffic. It is used for measuring the worth and cost of a specific e-marketing campaign. This technique is applied with web banners, text links, e-mail spam, and opt-in e-mail advertising. (Although opt-in e-mail advertising is more commonly charged on a CPA basis.)
The Cost Per Impression is often measured using the CPM (Cost Per Mille) metric. (A CPM is the cost of one thousand (1,000) impressions.)
CPM is considered the optimal form of selling online advertising from the publisher’s point of view. A publisher gets paid for each ad that is shown.
This type of advertising arrangement closely resembles Television and Print Advertising Methods for speculating the cost of an Advertisement. With Television the Nielsen Ratings are used and Print is based on how many readers a publication has. For a Website the numbers are a bit more exact due to the TCP/IP nature of the Internet.
CPM and/or Flat rate advertising deals are preferred by the Publisher/Webmaster because they will get paid regardless of any action taken.
For Advertisers a Performance Based system is preferred. There are two methods for Paying for Performance: 1) CPA – Cost per Action/Acquisition and 2) CPC – Cost per Click Through.
Today, it is very common for large publishers to charge for most of their advertising inventory on a CPM or CPT basis.
A related term, eCPM or effective Cost Per Mille, is used to measure the effectiveness of advertising inventory sold (by the publisher) via a CPC, CPA, or CPT basis.
Cost Per Mille
The initialization CPM comes from print world (and is a latin word), and stands for Cost Per Mille in the US or, more correctly, in the UK Cost Per M, with M representing the Roman numeral for thousand. When online advertising started gaining momentum, those in the industry used this term (rather than something like CPI) as a metric for describing the Cost Per Impression largely because advertisers were already familiar with the term CPM.
It is important to remember that when someone says something like, “our CPM is $5”. That this means that the Cost Per Impressions is $0.005 — half a cent.