Definition
Cost Per Impression (CPI) is a method of measuring the cost-effectiveness of an advertising campaign. It refers to the total amount an advertiser spends for every single instance their ad is displayed to a potential consumer. This metric is often used in digital marketing to calculate the cost of reaching a thousand audiences (cost per mille or CPM), thereby helping businesses decide where to allocate their advertising budgets.
Key Takeaways
- Cost Per Impression (CPI) is a marketing term used to denote the price of 1,000 advertisement impressions on a single webpage. If a publisher charges $2.00 CPI, that means an advertiser must pay $2.00 for every 1,000 impressions of its ad.
- The CPI model is generally used in banner and other forms of display advertising. It helps businesses to measure the cost-effectiveness and profitability of online advertising campaigns.
- Unlike other advertising models like Cost Per Click (CPC) or Cost Per Acquisition (CPA), CPI focuses on the visibility of the ads rather than engagement or actions. Therefore, CPI is the most suitable for campaigns focusing on high brand exposure.
Importance
Cost Per Impression, also known as CPI, is a critical finance term in digital marketing as it helps businesses measure the efficiency and profitability of an online advertising campaign.
It refers to the total cost an advertiser pays for displaying an ad per thousand impressions, where an impression means the ad was displayed on the page.
CPI is valuable because it allows companies to compare costs across different marketing channels, assess the reach of a campaign, and understand how much they are paying to make their ads visible to their audience.
High costs per impression may suggest that a campaign is not cost-effective, while a low CPI can indicate a more successful strategy.
Therefore, observing the CPI allows for more informed decisions regarding budget allocation and marketing strategies.
Explanation
The purpose of Cost Per Impression (CPI), an essential term in the realm of digital marketing and advertising, is to quantify the overall cost an advertiser is incurring for every single potential viewer exposure or “impression” of their advertisement on a digital platform. It functions as a metric to evaluate the financial efficiency or effectiveness of an advertisement or marketing campaign online.
Businesses use this model to allocate their marketing budget effectively and to ascertain the affordability and economic feasibility of an advertising campaign, focusing on broad reach rather than user engagement. CPI is used predominantly when the desired outcome of a marketing strategy is to increase brand awareness or exposure.
It offers valuable insight into how much it will cost a company to have its ad literally “viewed” by a potential customer, and not necessarily engaged with. By comparing CPI values of various advertising strategies or channels, businesses can discern which means of advertising provides the broadest reach for their budget.
This comparison aids in optimizing advertisement placement and maximizing return on marketing investment.
Examples of Cost Per Impression
A digital marketing company is running an online advertising campaign for a clothing brand on a popular social media platform. The cost per impression would be the total amount they spend to have their advertisement displayed to users one thousand times. If they spend $100 to have the ad displayed a total of 10,000 times, then the cost per impression (CPI) would be $
A home goods company launches a new product and decides to use banner advertising on a high-traffic website to promote it. The website charges $5 for every thousand impressions. Therefore, the cost per impression is $
A mobile game developer decides to put advertisements within their game to increase revenue. They arrange for an advertiser to pay them $500 for every 100,000 times the advertisement is displayed to players of the game. Hence, the cost per impression is $
FAQs on Cost Per Impression
1. What is Cost Per Impression?
Cost Per Impression (CPM) is a marketing term that represents the cost of one thousand advertisement impressions on a webpage. If a website publisher charges $2.00 CPM, that means an advertiser must pay $2.00 for every 1,000 impressions of its ad.
2. How is Cost Per Impression different from Cost Per Click?
Cost Per Impression (CPM) is the cost incurred for every thousand potential customers who see the ad, whereas Cost Per Click (CPC) is the cost for each actual click made on the ad. In other words, CPM is about potential reach whereas CPC is about actual interaction with the ad.
3. How is Cost Per Impression calculated?
Cost Per Impression is calculated by dividing the total cost of an advertising campaign by the total number of impressions, then multiplying the result by 1,000. For example, if an advertising campaign costs $200 and generates 50,000 impressions, the CPM would be $4.00.
4. What factors can affect Cost Per Impression?
Cost Per Impression can be influenced by several factors including the audience targeting, the ad quality, the competition for ad space, the time of year, and more. For instance, ad space during high-peak times like holidays may be more expensive due to increased competition.
5. Why should advertisers care about Cost Per Impression?
Understanding Cost Per Impression can help advertisers budget their ad spend more effectively and measure the efficiency of their campaigns. A lower CPM means a lower cost to reach 1,000 potential customers, which can be very beneficial especially for brands aiming to increase brand awareness.
Related Entrepreneurship Terms
- Advertising Networks
- Cost Per Click (CPC)
- Pay Per View (PPV)
- Display Advertisement
- Online Marketing Strategy
Sources for More Information
- Investopedia: Investopedia is a comprehensive financial dictionary that provides definitions, explanations and examples for various finance terms including Cost Per Impression.
- Marketing Land: Marketing Land provides a plethora of articles and guides on digital marketing terms such as Cost Per Impression, offering detailed insights into practices and strategies.
- HubSpot: HubSpot offers a wide range of resources including blogs, guides, and infographics that provide detailed explanations of marketing and advertising concepts including Cost Per Impression.
- AdRoll: AdRoll is a marketing platform that has dedicated blogs and resources for various advertising and marketing metrics, including Cost Per Impression.
