CPM stands for cost per mille (the French word for “thousand”). Though often confused by those not familiar with the ad industry as cost per million, this metric actually refers to the all-in cost for an advertiser to run 1,000 impressions of an individual ad unit.
For example, a $5 CPM associated with a 728×90 leaderboard means that the advertiser would pay $5 for every 1,000 of those ad units served. If an IO ordered 100,000 ad units the total cost would be $500.
This pricing model is also sometimes known ad cost per impression, since the advertiser pays for each ad served, not per a specific result (i.e. a sale, registration, opt-in).
It’s critical to understand the difference between CPM (cost per mille) and RPM (revenue per mille). The differences are pretty obvious but it’s an important thing to keep in mind.
In some cases, these numbers will be the same. More often than not, there are big gaps between these two figures and there are a myriad of reasons why this might be.
The most common reason for this is an ad network. If a publisher decides to use an ad network instead of working with an advertiser directly, the network will take their cut (often a big one). The advertiser may pay a CPM of $5 and the publishers RPM may well be $1.5.
The cost per impression (aka CPM) pricing model is most often used in display advertising. If this is something you’ve got an interest in, we have a lot of resources on it.