Who would have thought that when Facebook was created all the way back in 2004 that the company would eventually empty the wallets of businesses of all shapes and sizes?
Probably not Mark Zuckerburg.
Regardless, fast forward to now and the social media conglomerate now measures cost per one thousand impressions, also known as CPM, for the advertisements your business decides to run to get in front of your audience.
If your business is taking the time to run ads on Facebook, you need to know how Facebook is calculating its CPM metric in the first place.
The ins and outs of calculating CPM on Facebook
So, how does Facebook calculate CPM, exactly?
First, Facebook will take a look at the amount your organization is spending on a specific ad campaign, as well as the number of impressions the ad gets to calculate your CPM.
The math is broken down like this: Facebook takes the total ad spend divided by the impressions received and then multiplies that by 1,000 (hence the “per thousand” in the CPM breakdown). Impressions are what measures how often your ads were on screen for your target audience.
If you’re anything like me, and math wasn’t your best subject in school, you’ll probably do well with an example. Let’s say your company is investing $100 this month on a campaign. If that campaign is able to get 20,000 impressions, then your CPM will be $5.
To do this math, you’ll take 100 divided by 20,000 = 0.005
Then, multiple this by 1,000 = 5
Voila, your Facebook CPM for that particular advertisement is $5.
As you calculate your CPM, remember that there are specific factors that also go into what your CPM will be. These include:
- Who your target audience is
- The amount of days your ad is scheduled to run
- Where your ad is scheduled to appear (On Facebook or on Instagram)
- The frequency cap, meaning the maximum number of times someone will be shown your ad
- Your maximum budget that you’re willing to spend on your Facebook ad
- The market supply and demand
- If you have any other overlapping campaigns
- The positive or negative reviews your ad receives
A lot goes into the perfect Facebook ad, and in order to know how the ad is really performing, you need to be well-versed in cost per one thousand impressions, otherwise known as the CPM. When you know how Facebook calculates this metric, you’re one step closer to understanding how to run ads on this ever-popular social media platform.
Remember, if you want to run ads on Facebook effectively, you’re going to want to keep an eye on your CPM, along with other crucial metrics that go into the perfect advertisement.