2 Questions to Ask About CPM Spend to Avoid Wasted Impressions

October 22, 2020
3 min

The term CPM (cost per mille) in advertising refers to the price you pay for every 1,000 impressions that your ad receives. CPM advertising is often preferred over CPC (cost per click) or CPA (cost per acquisition) because it appears to be cheaper. However, CPM can be deceptive if you don’t take a look under the surface. Here are 2 key concepts that you need to understand to avoid wasted impressions when distributing your message via CPM advertising.

1. Target Audience

No matter what platform you use to distribute your ad, it’s essential that you understand what audience your ad will reach. Why? Because if you are paying for impressions to an audience other than the audience you wish you reach, you’re wasting impressions (and money).

Have you ever heard “We can reach more than 400,000 veterinary professionals in the US!” You may have then wondered who these 400,000 people were, as the entire market of veterinary professionals in the US is much smaller than the quoted number.

In a case like this, the number might be augmented with industry employees (potentially including competitors). Or it might include a mixed audience of pet owners and other related but peripheral veterinary job functions that aren’t relevant to your product or service.

An Example of Wasted Impressions

Let’s take a look at the financial impact these irrelevant impressions can have on your campaign ROI.

Let’s say your CPM is $100, which means you’re paying $0.10 per impression. Media Partner 1 is able to target your ad exclusively to the audience you want, veterinary practice managers. Media Partner 2, on the other hand, will be targeting your ad to a mixed demographic that includes veterinary technicians, veterinarians, practice managers, and employees of other companies in the veterinary industry.

In this example, Media Partner 2 will only serve about 25% of your ad impressions to your target audience of practice managers. This means your cost per the right impression has just jumped from $0.10 per target audience impression to $0.40 per target audience impression.

Let’s say you plan to spend $5,000 for the overall campaign, and you anticipate 0.5% of your target audience impressions to convert. Let’s see what you would pay for conversions based on the reach to your target audience with Media Partner 1 versus Media Partner 2.

Media Partner 1Media Partner 2
Total Spend$5,000$5,000
Total Impressions Delivered50,00050,000
Impressions to Your Target Audience50,00012,500
Cost per Conversion$20$79

Your campaign with Media Partner 2 will cost 295% more per conversion because of wasted impressions.

2. The Number of Times the Same Person Sees Your Ad

How many times is your ad being repeatedly served to the same person? Ideally, the same person shouldn’t see your ad more than 3 times. The frequency number should be factored into your conversion projection.

If your ad is being served more frequently, you will waste additional impressions and your conversion rate will suffer. As a result, your campaign ROI will decrease. If you combine an over-served ad with a poorly targeted audience, the negative impact on your ROI will be amplified.

Frequency and Wasted Impressions

Consider the same example as before. But now, let’s add in the frequency factor. Media Partner 1 serves your ad 3 times per target audience member. Media Partner 2, however, serves your ad 6 times per target audience member. Let’s see what happens to ROI.

Media Partner 1Media Partner 2
Total Spend$5,000$5,000
Total Impressions Delivered50,00050,000
Impressions to Your Target Audience50,00012,500
Unique Prospects Reached16,6672,083
Conversions (Rate of 0.15%)25031
Cost per Conversion$20$161

Adding in this frequency factor makes your campaign with Media Partner 2 cost 705% more than the same campaign with Media Partner 1.

Bottom Line: Ask 2 Questions

Before you sign off on your next CPM-based campaign, make sure you understand who your ad will be served to and how many times. Your campaign ROI will thank you (and so will your boss).