CPM
Cost per mille (CPM), also called cost per thousand (CPT) (in Latin, French and Italian, mille means one thousand), is a commonly-used measurement in advertising. It is the cost an advertiser pays for one thousand views or impressions of an advertisement.
The CPM model refers to advertising payed for based on impressions. The total price paid in a CPM deal is calculated by multiplying the CPM rate by the number of CPM units. The CPM model is in contrast with the Pay per Action model (CPA) while the cost-per-click (CPC) model is somehow between these types of advertising payment models.[1] In order to measure the effectiveness of an advertising model, whether it is CPC, CPA, CPM or CPT - one would track the eCPM (effective cost per thousand views).
How does it work?
The CPM model is commonly used in the case of advertising based on cost per thousand, which refers to the cost per thousand page impressions. The websites which use CPM in order to make profit measure the RPM (revenue per 1000 impressions).[2]
The CPM model is based on a flat rate, which is an important advantage for advertisers.
The host is payed for every 'view' that an advertisement on his website receives.
Using CPM
Advertisers are attracted by CPM advertising campaigns due to the enormous amount of visibility these models can bring. The advertisement is often viewed even when the advertisement itself is not clicked. It is believed that the advertisement is still read and that this exposure is important over the long run. If the advertisement is attractive and attracts the visitors' attention, the Click Through Rate (CTR) will be higher, thus increasing the effectiveness and the outcome. [3]