Under a CPM arrangement, the advertiser agrees to pay the publisher a predetermined amount for every 1,000 ad impressions served. This effectively means that the publisher is compensated for every ad shown.
Here are a few things to know about CPM pricing arrangements:
- Commonly used in direct ad sales
- Commonly used for “branding campaigns” where primary objective is to increase awareness of a company or product
- Results in most predictable income stream for publisher
- Gives publisher nearly full visibility on value delivered to advertiser
Advantages:
The most obvious advantage with a CPM agreement is that you make money for every display ad you serve, regardless of whether or not it generates a click, lead, or other action. Every visitor who comes to your site makes you money, plain and simple. This results in a relatively stable stream of earnings; if you can predict your traffic, you can predict your revenue.
The ability to maintain control and visibility is also an advantage here; you know exactly how many ads you serve, and therefore exactly how much you’re owed from your clients.
Disadvantages:
From a publisher’s perspective, there aren’t many disadvantages to a CPM pricing model for display ads. But in exchange for the stability achieved, you do risk leaving some money on the table if your site has an audience that performs well from an advertiser perspective. In other words, CPM arrangements don’t always lead to the highest earnings; if your site has an audience that is a good fit for an advertiser’s message, you may be able to generate more by being compensated for each click or each action.