CPM: what it is, how to calculate it and why it goes up
CPM (cost per mille) is how much you pay for your ad to be shown a thousand times. It measures the auction price of reaching the audience you chose.
Formula
CPM = Spend ÷ Impressions × 1,000
CPM connects to CPA like this: CPA = CPM ÷ (1,000 × CTR × conversion rate), with CTR and rate as decimals.
Worked example
- Spend: $1,200
- Impressions: 80,000
$1,200 ÷ 80,000 × 1,000 = $15
With a 1.5% CTR and a 2% site conversion rate, this CPM produces a CPA of $15 ÷ (1,000 × 0.015 × 0.02) = $50.
What the agents do with your CPM
CPM for ad set "7-day remarketing" rose 64% in two weeks, with an audience of 3,800 people.
Suggestion: widen the window to 30 days. The small audience is making the auction more expensive and frequency is already above 6.
How to read CPM
CPM is the price of attention
It rises with small or contested audiences, on dates like Black Friday and when many advertisers target the same people.
A high CPM is not a problem on its own
A pricier audience that converts better can have a lower CPA. Decide on CPA, use CPM to understand why.
Break the CPA down
If CPA went up, check which link changed: CPM (auction), CTR (creative) or conversion (page). Each has a different fix.
When the number misleads
Cheap placements pull the average down
Cheaper placements lower the average CPM without bringing the same results. Compare CPM by placement.
Different platforms, different auctions
Meta, YouTube and Display CPMs do not compare. Each auction has its own format, intent and audience.
Seasonality
Comparing November CPM with October shows the calendar, not your campaign. Compare with the same period last year.
Where CPM shows up
Ask Sherlok
Why did my CPM go up this week?
Which placement has the lowest CPM with sales?
Did my CPA rise because of CPM or CTR?
How much did CPM change month over month?
Questions about CPM
Why does CPM go up?
More advertisers competing for the same audience, an audience that is too small, seasonal dates or a creative with low relevance. Breaking down by audience and placement usually shows the cause.
CPM or CPC: which should I track?
Both, because each explains the other: CPC = CPM ÷ (1,000 × CTR). CPM shows the auction price; CPC shows how much of it the creative turns into clicks.
Should I pick audiences by the cheapest CPM?
No. Pick by CPA or return. A cheap audience that does not buy ends up costing more.
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