As you are navigating the world of Digital marketing, you will find many ad networks advertising CPM online marketing programs, but what is CPM advertising, and how does it work? Basically it refers to the payment scheme of an internet marketing program. CPM means “cost per thousand” (‘M’ is the Roman numeral for 1,000), and it refers to the number of impressions, or actual viewings of an individual ad.

How does it work?

Some of the first advertisements to exist on the internet were simple banner ads, 480×60 pixel graphics appearing at the top of web pages, sometimes sporting simple animation, but usually just text and a picture. At that time, before PPC, or pay-per-click, became a common form of internet marketing, all ads were charged a fixed price per each thousand impressions. This made online advertising rates, cpm rates, structurally not that different from print-ad rates.

Unlike the newer, more popular PPC (pay-per-click) advertising scheme, CPM online advertising is not based on click-throughs. That is, the cost is based on how many times a banner is displayed to viewers, not how many times users actually click a link. Each instance of an ad being displayed is considered an impression, and because of this, it is riskier for the advertiser than for the advertising network. However, studies suggest that this risk leads to better-constructed, better-written, better-placed advertisement, which in turn leads to a better response from viewers.

Targeted CPM

While PPC advertising quickly overtook CPM advertising because of its more advertiser-friendly payment structure, it has three significant flaws:

• Relevance. With PPC ads, the keyword that the advertiser bid upon is often the only relevant content. If Cingular Wireless, for example, decided that people who like bananas are more likely to buy cell phones, they might bid on the word “bananas,” and then competing companies like Verizon and T-Mobile would begin bidding on the same word, forcing the price so high – for a word that has nothing to do with their product – that an actual produce vendor might not be able to afford it. In addition, it would cause searches for “bananas” to result in ads for cellular plans, not actual fruit.
• Simplicity. While the use of keywords seems simple, there are so few keywords that remain available that finding a relevant one that is also available for a price you can afford is becoming extremely difficult. In addition, because advertisers only pay for click-throughs, large companies bid on many many words, driving up prices, and decreasing availability even further.
• Reliability. While it is true that advertisers only have to pay for click-throughs, it is equally true that not every click becomes a customer, and click-fraud, where ad-networks click on their ads intentionally to improve their income, is extremely prevalent. Research suggests that up to 50% of all clicks are fraudulent ones.

If PPC advertising has so many problems, what is a good method of advertising? CPM online ads may be the answer, but the trick is in the targeting, or using PPC-style text ads (because text ads, according to a study by the Poynter Institute, garner a 7-second viewing, while display ads are only viewed for about 1.5 seconds), that are relevant to the content of the page on which they are published. For example, a website about shoes might display ads for shoe stores or shoe repair services.

Benefits of targeted CPM advertising

Because targeted CPM online advertising combines the best aspects of PPC advertising and traditional CPM advertising, there are many benefits to choosing targeted CPM online advertising:

• Design and Placement. Online advertising CPM ads are well-designed, attractive and consistent, in order to encourage viewing, and are only placed on the most visible and active portions of web pages. In addition, the number of ads per page is limited.
• Pricing. With targeted CPM advertising, calculating rates is easy, because fixed CPM pricing is used. This also tends to mean that advertisers write better ads, because content, not clicks, bring the customers.
• Relevance. In this kind of advertising, CPM online ads are formed by a headline and text that are both related to the content of the website where they are displayed. While keywords are used as a secondary influence, content drives this marketing medium.
• Tracking. Because both impressions and click-throughs are tracked, the advertiser gets complete feedback on each ad’s performance. Fraudulent clicks do not affect cost, because of the CPM pricing.
• User-Friendliness. With CPM advertising, the fact that the ads are text-based makes it easy to create or edit any advertising message. Additionally, the absence of keyword bidding saves money and removes ongoing bid maintenance from the equation.

So, how do i do this?

You’ve budgeted for advertising. CPM online ads seem like the way to go after you’ve researched many internet marketing solutions – now what? Well, just as in any other form of advertising, you need to create your ad. If your budget includes it, you may want to consult an internet marketing firm for assistance, as such companies have people to write ad copy as that will maximize your product. Then you, or your marketing firm will contact a media buyer, who will actually work with different ad networks to secure placement of your ad and negotiate a price.

Ad networks

As with any form of internet marketing, there are several networks that sell CPM online advertising. While some claim to ONLY deal with CPM advertising, however, most also have PPC programs as well. Alternatively (or additionally) some networks specialize in specific content, which caters to advertisers seeking a female demographic. Or for advertisers who want exposure on Spanish-language sites in the United States and abroad.

Is CPM advertising worth doing?

While CPM advertising can be a bit riskier for the advertiser than performance based marketing programs, it tends to be an extremely cost effective method. With CPM advertising, calculating the cost per click is the best way to compare the actual cost to a similar PPC campaign.

With PPC advertising, costs vary greatly, depending on the keywords chosen. You might pay as little as $0.15 per click-through for unpopular keywords, or as much as several dollars for highly desirable ones. With CPM online advertising rates are a little different, but the cost-per-click is easily calculated.

For example, if your price is $2.00 CPM, and your ad generates 5 clicks for every 1000 impressions (which is a click-through rate of 0.5%), your effective cost-per-click is $2.00 / 5 or $0.40. If your ad generates 10 click-throughs (raising the rate to 1%), your effective cost-per-click is reduced to $0.20.

So is it worth it to use this kind of advertising? CPM online ads that use targeting techniques will garner a higher viewing rate for a fixed price no matter how many click-throughs are generated. For a smaller business, especially, CPM advertising is absolutely worth trying.