CPM history

In early Internet days, ads used to be served on banners - Heard about banner ads or not? These banner ads were charged at a fixed rate per thousand impressions (CPM). If an Internet user opened a page that featured a banner ad, then an impression was recorded. The CPM software kept track of the total number of impressions on the banner. The advertiser was charged a fixed rate (CPM) for every 1000 such impressions - of course, the advertiser had to pay in advance.

This method was heavily abused on the Internet when small sites realized that they could become affiliates of an ad network, host its banner ad, and create a link-farm site, without any or notable content, and they would just keep making money whenever a CPM was credited to their account.

Targeted CPM

There is a new wave in Internet advertising that is floating around but has not turned mighty enough. It combines the CPM and the PPC models, and is called targeted CPM. The following are the salient features of the advertising CPM online model:

• It gives the option to the advertiser to add a small graphic - maybe his logo. Of course, these small graphics have to be used along with the text, with the text doing the talking in these ads.
• Unlike dozens of PPC ads placed on a page in a PPC model, the targeted CPM model allows only for a few ads on a page. This helps increase ad visibility.
• The cost is fixed for one thousand impressions.
• Though the costs are fixed, the relevance still remains intact because targeted CPM advertising works on keywords too.
• As the costs are fixed, there is no bidding, no war to be fought with competitors. Also, the ad position will not change because there cannot be a higher bidder.
• The impressions, the click-throughs, and sometimes the conversions are tracked in targeted CPM. The advertiser thus knows how many people saw his ad, how many clicked on it, and how many bought his products.
• Though there is no need to change a CPM ad as the cost is fixed, advertisers still may change it if they like to, as the ad is a mix of small graphics along with text.

PPC v/s targeted CPM

Any form of advertising has to bring in customers and be cost-effective.The old CPM model in its original avatar is not going to come back - so it makes sense to compare the PPC model with the targeted CPM model.

A PPC appraisal shows that its costs are variable, based on the bids you place on keywords. Keyword costs can be as low as 1 cent a keyword (so unpopular that it may be ignored by Internet surfers, and that is why so cheap) and can go up as high as $ 50 a keyword (so popular that it will definitely be clicked upon, but you cannot afford it).

Let us take a PPC example - amount bid on keyword: $ 0.50; click-throughs: 1,000; total ad expense: $ 500.

Now let us take the example of a targeted CPM - CPM cost: $ 3 (for 1000 impressions); impressions generated: 1000; click-throughs: 100; cost per click: 30 cents a click.

You can see from the above example that your expense was $ 500 in the PPC model, while you spent just $ 3 on a CPM campaign. Of course, you received 1000 clicks in the PPC campaign and just 100 clicks from the CPM campaign, BUT if you wanted to receive 1000 clicks from the targeted CPM model, all you have to spend is $ 300 ($ 3 CPM cost for 10,000 impressions, leading to 1, 000 click-throughs). The targeted CPM saved you $ 200!

The fixed cost in a CPM model is its greatest advantage, while an escalating, variable and should-be-constantly-monitored cost is the greatest disadvantage of PPC advertising. Targeted CPM finds a way out and it is here to stay.