How To Be The Gordon Gekko of Advertising

What you pay to advertise to customers directly influences important measurements such as cost per lead, cost per customer acquired, and cost per sale

Intelligent investors use reliable measurements when evaluating stocks, like earnings per share (EPS), or book value.  Intelligent Advertisers should embrace Cost Per Thousand, or CPM, as their most reliable metric in measuring advertising investments and value. 

CPM is the only universal measurement that shows how much you are paying per 1,000 people who view, read, or listen to your media. For example, if you regularly buy meat from a butcher or grocery store, you know it’s priced by the pound. Ground beef is usually the least expensive, and prime cuts of steak are usually the most expensive meat per pound. Different cuts and sources of the meat influence the pricing. The same thing goes for media, and just like cost per pound, cost per thousand is a simple and reliable method of determining value.  

Ad sellers and agencies make this more complicated than it needs to be. In radio and television, a common measurement is cost per rating point, or CPP.  Don’t bother with this; it’s confusing on purpose so you feel compelled to pay an agency to buy your media and they feel compelled to pay a ratings service like Nielsen.  Simply put, you can’t compare the cost or value of other tactics with a broadcast specific measurement so why bother?  

Also, getting worked up about the cost of the ad or the rates is a waste of energy and not the best way to secure a good deal.  If you believe the cost is high, there is probably a good reason, and it’s usually based on the quality and quantity of audience reached, or the demand for this media.  I’m not saying don’t negotiate, but the best rates are secured by making long term commitments, having an understanding (based on CPM’s) where the market is, and planning ahead.  

Knowing the CPM will guide you to effectively judge the overall value of all media.  For example, while newspapers can still be extremely effective, generally their cost per thousand is higher than local TV like the NBC or CBS station in your city.  Everyone assumes or believes TV is expensive but in reality they just reach a lot of people.  Only CPM reveals the true cost comparison, as you can see in the figure below. 

For print media, the measurement pushed by salespeople is often readership, which assumes paid subscribers aren’t the only ones reading the magazines and newspapers. Publishers assume their publications are being read by more than just the paid subscribers, and to a certain extent, they are correct—for example, when newspapers are passed around coffee shops, offices, libraries, or airports. However, there’s no way to accurately measure this, so stick to relying on the CPM of verified paid subscribers, because this is the only guaranteed measurement. Consider pass-along readership as added value.  

In digital advertising, it’s even more confusing. Website publishers will push impressions and page views. Instead, you want the cost per thousand of unique visitors in an average month, which is most closely tied to verified paid subscribers and an indication of the actual reach. The unique-visitor metric simply indicates the number of different people who viewed the website or a particular section of a website.  

The only important measurements are how many people see your ad, how many times they see your ad, and what it costs to reach per 1000 verified people.  Every media can provide this information.

Below is a very general guide of various media, their attributes and average cost based on CPM.