To calculate Cost-Per-Thousand or CPM, there are two things you need to know:
- Total advertising budget
- Total impressions
Lets say you have a blog that serves a total of 50,000 ad impressions and you have an advertiser that wants to advertise on your blog and is willing to pay you $250.
To figure out the CPM rate, you would take the $250 and divide by the total ad impressions which is 50,000 then multiply by 1,000 which gives you $5 CPM.
The reason you multiply by 1,000 is because the impressions are measured in “thousands” so you have to convert to the same units and get the true answer.
Our favorite and most simplest way we found that works for me to quickly calculate CPM is by eliminating the “divide by 1,000” step and just removing the three zeros after the last comma in the ad impressions amount.
In other words, taking the total advertiser budget of $250 and dividing it by 50 gives you the same answer of $5 CPM.
Here is another example using my simple approach or “cheat”; lets say your blog serves 2,500,000 ad impressions and an advertiser wants to pay you $3,000 to advertise on your blog.
To quickly figure out the CPM rate, you’d take the advertiser budget of $3,000 and divide by 2,500 (remove the three zeros after the last comma; always after the last comma to convert to the same units) and you get a $1.20 CPM rate.