CPM (Cost per Thousand) Advertising
Concept summarized by Sam Mishra, MBA (MIT Sloan)
CPM (Cost per Thousand) impressions is a standard pricing model in advertising. In CPM, M denotes the Roman numeral for one thousand.
Before the Internet advertising era began, a CPM ad unit typically cost 20 dollars and upwards. This can be best explained with an example. Suppose a town in USA has a weekly newspaper called Small Town USA Weekly, with a circulation of a thousand readers. So, at $20 per CPM, for GM to place a small Hummer ad will cost GM twenty dollars per week, or 52 * 20 = $1040 per year. GM will probably place the same ad in multiple newspapers, so the print advertising budget for Hummer will be actually a big dollar amount.
Now, let’s consider the Internet era. Web content providers like Franteractive and others can charge GM the same price for the same number of viewers. Every time a Franteractive reader browses a page which has a Hummer ad on it, the number of impressions goes up by 1. Once the number of impressions reaches 1000, it can be assumed that a thousand Franteractive visitors have viewed the hummer ad, and Hummer / GM pays Franteractive $20, either directly, or through an Internet ad agency such as Google / Yahoo!
Here, the CPM pricing of $20 is used as an example. If a website is popular, it can charge more to have CPM ads placed on its website. If the ad unit is a large impression as opposed to a small one, the CPM pricing can be higher.
Please also see CPC (Cost per Click) advertising.
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