When it comes to operating a business, it is important to know how effective your advertising campaign is in reaching your target audience. One way to measure that effectiveness is to calculate cost per thousand, otherwise known as CPM. (M is the Roman numeral for 1000.) This can be used for things such as measuring website advertising impressions or calculating the cost for a television commercial to reach 1,000 homes.
Understand the equation. The CPM equation reads:
Cost / (Total Impressions / 1,000) = CPM
In this equation cost represents the total amount of money that was spent. The total impressions is the amount of people you reached during a given time frame. And the 1,000 represents the amount of people to reach.
Plug the numbers into the equation. For example, you spent $500,000 to shoot a commercial that played in three million homes during the course of a sporting event. The commercial aired only once. The equation would read:
$500,000 / (3 Million / 1,000) = CPM
Note that if the commercial ran two times, you would multiply your impressions by two, if it ran three times, by three, and so on.
Calculate the CPM equation. Using the example, the calculation would be:
$500,000 / 3,000 = $166.67
This means that it cost $167.67 to reach each 1,000-person advertising pool.