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Concept

Impressions and CPM

Priced per thousand views.

HOW IT WORKSA reader opens a pageor app with an emptyad slotAdvertisers bid aprice per thousandimpressions: the CPMThe winning ad isshown, and oneimpression is countedThe impressionsare added upover the campaignThe advertiserpays CPM ×impressions ÷ 1,000Counting every showing gives buyers and sellers one unit to price, bid on and check.HOW IT WORKSA readeropens a pageor app withan emptyad slotAdvertisersbid a priceper thousandimpressions:the CPMThe winningad is shown,and oneimpressionis countedTheimpressionsare addedup overthe campaignTheadvertiserpays CPM ×impressions÷ 1,000Counting every showing gives buyers and sellers one unit to price, bid on and check.HOW IT WORKSA reader opens a page or app with anempty ad slot↓Advertisers bid a price per thousandimpressions: the CPM↓The winning ad is shown, and oneimpression is counted↓The impressions are addedup over the campaign↓The advertiser pays CPM× impressions ÷ 1,000Counting every showing gives buyers and sellers one unitto price, bid on and check.
Each time an ad is shown to one person, one impression is counted, and the advertiser pays its winning price per thousand impressions across the campaign.
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Impressions and CPM are how online ads are counted and priced. An impression is one showing of one ad to one person. CPM, short for cost per mille, is the price an advertiser pays for every thousand impressions. "Mille" is the Latin word for a thousand. Ads can also be priced per click (CPC, cost per click) or per app install (CPI, cost per install).

Here is how it works in general. A reader opens a web page or an app that has an empty ad slot. The publisher, the website or app that owns the slot, offers it for sale through its selling software, a supply-side platform. The publisher sets a floor price, the lowest CPM it will accept. Advertisers' bidding software, a demand-side platform, bids a CPM for that one view. The highest bid wins, and the winning ad appears. When the ad is shown, one impression is counted. At the end of the campaign, the impressions are added up, and the advertiser pays the CPM multiplied by the number of impressions, divided by 1,000. The software companies in between keep a share, and the rest goes to the publisher.

The arithmetic is simple. At a CPM of ₹120, an advertiser that buys 5 lakh impressions pays ₹60,000, which is 12 paise for each showing. Many buyers now count an impression only if the ad was actually visible on the screen for a moment. This is called a viewable impression.

Take, for example, a free word game. App makers who want new players often pay its mobile ad network for each install instead, because an install is what they really want.

Consider an ad on a smart TV. Connected TV advertising usually charges a much higher CPM than a phone banner, because the ad fills a large screen and is often watched by a whole family.

Say a bot opens a website thousands of times a day. Each visit creates a fake impression, which is ad fraud, so buyers use ad verification to check that real people saw the ads.

How is CPM different from cost per click? With CPM, the advertiser pays for being seen, whether or not anyone acts. With cost per click, the advertiser pays only when someone clicks, so the risk of an ad that nobody clicks moves to the seller. Finding out which ad finally led to a sale is a separate question, answered by marketing attribution.

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