How to calculate cost per thousand (CPM) in paid media

Cost per thousand is a key metric in paid media planning. It’s important because it tells you the comparative cost of reaching the same volume of target audience in different media channels. Did you know that the cost of reaching 1,000 people in TV is about £5 and the cost of reaching 1,000 people by direct mail is about £500? Or the cost of reaching people in programmatic display is about £1.50 and in radio it’s about £3?

If you’re a media planner allocating budgets it’s impossible to do this properly without an appreciation and understanding of cost per thousand by media channel.

Calculating this metric is not difficult – you simply divide the cost of an ad by the number of audience it will deliver.

Let’s work through some examples:

• A radio station tells you an ad will costs £500 and be heard by 50,000 listeners. Good value or not?  Let’s divide £500 by 50 (that’s 50 thousands). Answer £10. The range you’d expect to pay for radio is between £1 and £5 so £10 is very expensive.
• A newspaper rep tells you a half page ad will cost £10,000 and run on print run of 1 million. Let’s do the calculation: £10,000 divided by 1,000 (thousands) is £10. In press you could expect to pay between £5 and £15 for a half page so a £10 CPM isn’t bad.
• A DM data owner tells you it will cost £20,000 to buy a list of 10,000 names. The CPM is £2,000. That’s extremely expensive.  Even the very highest quality premium DM lists rarely cost more than £500 CPM.

Accounting for the size of format of your ad

Some ad are bigger than others, in radio and TV some are longer than others. In digital display some are static images, some are animated and some are video. The size and format of an ad can have an impact on the CPM.  Let’s look at a press example:

A newspaper sells 500,000 copies a day. A half page ad cost £5,000 and a quarter page ad costs £3,000. The CPM on the half page is £10 whilst the CPM on the quarter page is £6. By using a quarter page you are reducing your CPM from £10 to £6. Across a large campaign that’s a big cost saving.

How CPM affects reach

Assuming you have a fixed budget of £200,000, you will reach 20m people with a half page campaign (£200,000/10*1000), but you’ll be able to reach more than 33m with a quarter page campaign (£200,000/6*1000).