Friday, February 15, 2008

Cost per Impression Advertising

In the heyday of Internet advertising, when Yahoo ruled the world, the bulk of advertising was cost per impression also known as CPM.

CPM stands for Cost-per-Mil, which literally means dollars per thousand impressions. An advertiser pays a certain amount for their ad to be seen a certain number of times.

The advantage to CPM advertising are that you aren't relying on quality ads to generate clicks. Advertisers are getting smarter and they're buying Cost-per-Click advertising designed to promote their website without actually encouraging a click. They know that they are getting free advertising right up until the point where people click the link.

This is particularly true of graphic ads where the advertiser is creating brand recognition. A movie review website for example should focus on impressions rather than clicks. A reader who sees an ad may go to a movie without actually visiting the movie studio website. This is particularly true when they see the same ad dozens of times. The movie studio is getting value every time the ad is displayed, but only paying when the ad is clicked.

There are two disadvantages to CPM advertising.

First, you must have traffic. If your websites only viewed by 12 people a day, and you're being paid $10 to display an ad 10,000 times, it'll be quite a while before you make any cash. You can combat this somewhat by having very highly targeted traffic.
Case Study: I have one website that only gets about 1000 visitors per week, and most of those on Wednesday. However, most of those hits are CEOs and owners of home health care organizations. Because of this, we are paid $1000 per thousand impressions.
The second disadvantage is the CPM advertisers are generally hard to find. Increasingly, today's focus has shifted to pay per click or pay-for-performance. Advertisers tend to want guarantees.

The only two types of websites that can generate large revenue from CPM advertising are huge websites with a minimum of 100,000 views per day, or laser focused websites who attract an audience of highly sought after readers.
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