Cost Per Impression

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What Is Cost Per Impression (CPI)?

Cost per impression (CPI), is the cost incurred for every 1000 impressions to the advertiser for displaying their advertisement online. The main purpose of CPI is to help the company or the advertiser calculate the expense they incur for publishing an advertisement on internet platforms.

Cost Per Impression Meaning

CPI plays an important role in a marketing strategy. It helps advertisers understand the effectiveness of the ad. In addition, it assists in determining the cost incurred in producing an advertisement and whether it is feasible enough. A cost per impression benchmark can be more effective for low-engagement websites.

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  • Cost per impression, or CPI, is the amount the company spends on every 1000 impressions or views. It helps in gaining a high engagement and larger audience base.
  • To calculate CPI, divide the total advertising cost by the number of impressions gained by the company.
  • It is also called CPM (cost per mille), where mille comes from the Latin word meaning "thousands."
  • CPI allows businesses to raise brand awareness and increase the algorithm rate. However, fewer engagement sites can turn out to be ineffective.

Cost Per Impression Explained

Cost per impression, CPI, is the cost incurred per advertisement to the company for every thousand impressions it receives. It is an important concept in the marketing and advertising industry. It helps companies to plan for a higher reach and decide upon the future budget accordingly.

The abbreviation "CPM" refers to the cost per mille, where mille refers to thousands in Latin. It is a metric that measures how much a company spends to produce an advertisement that generates 1000 views or impressions. In short, if an ad gets 1000 plus views, it means the advertisement is successful. For example, if an advertiser pays $3 to get 1000 views on any medium, the average cost per impression or CPM is $3. The cost differs as per the client's needs. The ad agency charges as per 1000 views the commercial gets, which decides the advertising cost per impression.

For example, the CPI will be less if the website's banner size or ad space is less. Likewise, a larger space will attract more cost. Therefore, advertisement agencies always hunt for ad space to gain more clients, like the ad section in a newspaper. The ad that covers more space charges a higher advertising cost per impression. However, the CPI also varies if a company has multiple ads on different sites.

A company's ad on every site will attract a certain number of views. For example, an ad on YouTube with 3000 views will have a different CPI than another less popular platform. Therefore, the cost per impression benchmark for a higher reach will be comparatively high. In contrast, a less engagement rate website will charge a less CPM.

Formula

Let us look at the formula for cost per impression calculation:

Cost Per Impression (CPI or CPM) = (Cost to the Advertiser / No. of Impressions) x 1000.

where,

Cost to the advertiser refers to the cost incurred by the company to get 1000 views.

The number of impressions refers to the number of views a particular commercial received on a certain site.

Examples

Let us look at some examples of cost per impression calculation to comprehend the concept better:

Example #1

Suppose Wilson owns a company that is engaged in fashion apparel. However, the management feels the need to boost their marketing performance. As a result, they decided to reach 3000 new customers in 2 weeks. Therefore, they consult an ad agency and advertise on platforms like Amazon, Instagram, etc. They paid $1.03 per 1000 impressions (views). After two weeks, the marketing department noticed 2000 new views on their page. Later, they calculated the CPI for that advertisement.

CPI = (Cost to the Advertiser / No. of Impressions) x 1000

        = $3.09 / 2000 * 1000

        =  $1.545

Example #2

According to a report by Statista, in the third quarter of 2022, the CPI on social media worldwide was around $8.15. It is considered to be the highest compared to other platforms. In another report published in the Wall Street Journal, Netflix might be on plans to charge a cost per mille or CPI of $65 for thousand views.

Example #3

As per the news published in June 2022, Apple plans to change its marketing model from CPM to CPC (Cost per click). The CPM model will rule out Apple's advertising features as soon as the latter's setup completes.

Cost Per Impression vs Cost Per Click

Let us take a look at the key differences between cost per impression and cost per click:

BasisCost Per ImpressionCost Per Click
Meaning CPI is the cost incurred by the firm behind every 1000 impressions or views.CPC, or cost per click, is the cost incurred by the company every time a person clicks on the website. 
Purpose To determine the advertising expense that occurred on the number of views gained. To find how much the company (or advertiser) pays when customers click on their ads. 
Objective To increase the engagement and visibility rate. To boost the sales and revenue growth figures. 
Also known asCost per mille or CPMPay-per-click or PPC
Cost Cost-effective Expensive 
Formula CPI = (cost to the Advertiser / No. of Impressions) x 1000 CPC = (Advertising cost/ Number of clicks) 

Frequently Asked Questions (FAQs)

What is a good cost per impression?

A CPI can differ depending on the industry, budget, and advertising agency. However, a positive or good CPI ranges between $3 to $10 per thousand impressions. In contrast, it is a win-win situation if it is less than $3 or the impressions are more than the cost.

What is the difference between CPM and CPV?

Although CPM and CPV (cost per view) are algorithm metrics, they differ greatly. The former is the cost to the company (or advertiser) for every 1000 impressions they get on their advertisement. However, CPV is the expenditure by the firm for the number of times the audience watched the ad.

What are the advantages and disadvantages of cost per impression?

CPI helps the marketers and the advertising agency earn a good rate of return (or ROR) on the investment made. In addition, it increases the audience base to find potential customers for the company. Also, a good CPM increases the company's CLV (customer lifetime value). However, sometimes, the CPI can turn out to be negative. Therefore, sites with lower engagement rates might find it expensive to adapt to this model.