The cost of an advertisement or a schedule of ads is often based on CPM (Cost Per Thousand), a standard measurement that helps you gauge the potential reach of an advertisement or series of ads—before spending any of the budget.
In the advertising world, CPM refers to the cost of one thousand impressions of an advertisement, or 1,000 people exposed to your ad. It gives marketers a way not only to compare the cost of ads when planning a campaign, but also to measure the value of an entire campaign, even one that employs a variety of media to deliver its message. 
To calculate the CPM of a single advertisement, take the cost of an ad and divide it by the total audience, then divide that by one thousand: cost/(audience/1,000)=CPM.
If an ad costs $2,000 and the total audience is 120,000 people, the CPM would be $16.67: 2,000/(120,000/1,000)=$16.67.
Some nuances in the formula do exist depending on the medium.
- Online, CPM is calculated based on the number of times an advertisement is displayed to a user, regardless of whether the user clicks on it.
- In print media, CPM is calculated based on the number of copies of a publication rather than the average readership of a single copy; cost of a print ad is often determined at a flat rate, calculated by cost per column inch, so it’s important to calculate the CPM if it isn’t already provided with the rate information.
- For broadcast (radio and television), marketers should look at average viewers or listeners rather than peak numbers.
And of course, CPM doesn’t account for ad production costs.
Nonetheless, using CPM to plan and measure multi-channel advertising campaigns can thwart a postanalysis headache, so even if your campaign includes a traditional media type that is sold in flat rates, it’s helpful to convert the cost of all your ads into CPM.
Let’s say you’ve decided to place an ad in the program for the community arts theatre’s upcoming play, and all you have on the invoice is “1/2 page color ad, $200.” Find out the estimated number of attendees for all performance dates (say 15,000), and you’ll have something like 200/(15,000/1,000)=$13.33 CPM.
And it’s worth pointing out again here that no matter how good a CPM looks for the campaign budget, there’s no value in it if the ad isn’t reaching the right people.