The term cost per thousand (CPM) refers to a pricing model used to determine ad cost.
Ads are priced based on how much it costs to show the ad to one thousand viewers. This means that the total ad cost is not fixed.
The strange acronym for cost per thousand (CPM) is because of the fact that the last word was originally was “mille,” which is the Latin for thousand.
CPM is used mostly in traditional marketing along with other other performance-based pricing models such as cost per conversion and sales commissions.
For example if an ad is priced using CPM is quoted at $10 CPM, if the website showing the ad gets 10,000 visitors the total price will $100.
In addition to that, the ad contract can also state that additional payment will be made based on conversions (that’s the number of customers who clicked on the ad and actually ended up buying the product or service advertised on the specific ad).
For traditional advertising channels such as TV, the cost is computed based on the estimated number of viewers of the TV program in during which the commercial was aired. Obviously, this means that airing a commercial during very popular shows (primetime shows) and events (i.e. Super Bowl) will mean a much higher ad price.
Nowadays, CPM is becoming less popular for internet marketers. The pay-per-click model, wherein advertisers need only pay for ads that were clicked on by customers, has become more popular.