What is CPM advertising? What retailers need to know

Definition: Cost per thousand impressions, or "CPM," refers to the cost of displaying an advertisement one thousand times (known as "impressions"). The CPM pricing structure is used for some display ads and is an important metric for ecommerce businesses that maintain affiliate networks.

Ads on a CPM payment model are offered by Google Display Network (GDN), one of the most common methods for deploying and managing display advertisements. GDN manages CPM bidding and ensures that a business only has to pay each time its ads are actually seen by prospective customers. While CPC (cost per click) only incurs a cost when users click on the advertisement, CPM charges the advertiser every time an ad is displayed on an individual's web browser.

Viewable CPM: An alternative to traditional CPM

Viewable CPM, commonly referred to as "vCPM", allows a business to pay only when an ad is seen by users, as opposed to paying when the ad renders on page. This essentially means that the business is bidding on the value of an advertisement being displayed in a “viewable” position. Those who opt for a vCPM bid that is higher than a CPM bid will have an advantage in terms of winning these important types of impressions. Such a tactic will keep the business's bids highly competitive in the short-term as well as the long-term.

Why — and when — ecommerce businesses use CPM advertising

CPM is helpful for a business in a number of ways, including:

• **Increasing visibility:**Online businesses intent on establishing or expanding a brand value. This is a fantastic opportunity for newly formed businesses that want to make a name for themselves with customers as well as potential business partners.

• Advertising for relevant audiences: Promoting an online business on a highly-relevant affiliate website can make CPM beneficial from a sales and branding perspective.

• Driving conversion with high-performing campaigns: When display or banner ads with high conversion rate are paired with the right advertising platform, they can be quite effective. The right audience — for example, a shoe store advertising on a popular shoe blog —can make the CPM model work in its favor.

CPM vs. CPC

Online businesses focused on generating immediate sales or conversions of some type from a campaign may prefer paying for each click on a specific ad via CPC bidding. CPM works best for ecommerce firms interested in getting as many views of their ads as possible as a means of increasing awareness of and interest in their product(s).

When a business owner or manager sets a CPM, he or she should know that a maximum CPM bid can be established. This represents the highest amount that a business will spend for each 1,000 views of a certain online advertisement.