What is CPM in TV Advertising?

Cost per thousand, or Cost per Mille (as it’s officially known), is a term to indicate the price of 1,000 advertisement impressions. In TV advertising measurement, one impression would refer to one individual exposure and time in which a single user was exposed to an advertisement, and each subsequent exposure is a new, additional impression. The advertising cost is the total budget spent on a given campaign. So, the CPM can be calculated with a simple formula:

(Advertising cost / Impressions generated)*1000 = CPM

CPM measurement considers impressions by the thousand as a shorthand given the sizable reach of most television campaigns. CPM in advertising is considered an advertising measurement benchmark that is standardized across the industry.

Brands use CPM tv advertising trends to measure the effectiveness of advertising campaigns and various stages of deployment, and to compare success against previous campaigns. Since impressions are the precedent to conversion and revenue, measuring impressions can serve as an indicator of generating sales. Different advertisers have different predictions for how CPM should reflect revenue. Their predictions could be based on myriad factors, such as product type, the market, their target audience makeup and company sales goals against previous quarters.

Typically, CPMs tend to be higher in CTV ad campaigns because the inventory is more limited than with linear TV, and thus competition for slots is more aggressive. The limited nature of inventory is no longer really the rationale behind the premium cost; more so, it is that there is incremental cost for each level of targeting, demo, psychographics, etc.

At Simulmedia, our research with hundreds of clients has indicated that, for most brands, reaching an untouched prospect with a first impression is much more cost-efficient than reaching an existing prospect multiple times with increased frequency. The CPM value of reaching 1,000 new prospects, while often higher than when increasing frequency, is more rich than any other measurement. With strong creative, precise targeting and intentional timing, a campaign that reaches 1,000 new prospects could be attributable to numerous new, paying, loyal customers, making a higher CPM worth the investment.

One way to offset the risk of getting a high CPM when targeting new prospects is to make sure you have clearly defined your target audience. Simulmedia’s TV+® platform takes a data-first approach to gathering audience reach information that goes beyond the minimalistic basics of sex, age, location attributes. By looking at more and more specific identifiers, advertisers can create defined target audiences, and from there increase reach by building look-alike audiences, which are audiences with similar potential to engage. That way, when you take your campaign to scale, you won’t have to settle for simply increasing frequency and potentially numbing users to your ads.