How to Calculate the CPM for Television

You can use simple CPM calculations to see the value of your television ad.

An advertisement on television can be a costly investment, but it is a great way to get your product seen by lots of people at once.

The best way to know if you are getting your money's worth is to calculate the CPM of your ad. CPM is an acronym for cost per mille, which means the cost of getting your ad in front of 1,000 people. To determine how much you are spending on your advertising space per eyeball, use a few simple figures to ascertain your CPM.

Ratings Are Everything

The best way to get an accurate CPM for a television advertisement is to know how good the ratings are of the television show with which your ad plays. Nielsen ratings are the golden standard for estimating the popularity of a television show. The average for a network series is 11 percent of the television-owning American population, which is estimated to be 94 million households, according to the Museum of Broadcast Communications. That means a show with ratings of 11 percent reaches 10.3 million people. The more popular a show is, the more expensive advertising around it will be. A less-expensive example would be a show that is seen by 5 million people.

The Equation
If your ad is featured next to an average television show that garners 5 million viewers, then you can use that figure to determine your CPM when you compare it to the price of advertising. First, divide the viewer number by 1,000, since you are calculating the cost of one thousand viewers. The amount you are working with now is 5,000. If you buy a single thirty-second advertising slot for $10,000, then divide that price by 5,000 for a CPM of $2. This is the cost per 1,000 people if you buy $10,000 of ad time during a show that gets 5 million viewers.

Making the Most of Your CPM,
The best way to get a good deal on television ad time is by purchasing in advance. Once a year, typically in May, networks sell advertising slots for the upcoming television season at what is known as the upfront market. You are taking a chance by buying in bulk for a network that will be testing out new series in the fall, but often there are some guarantees. If a network fails to attract the ratings they promise to advertisers, they run free commercials to make up for it.

The Future of CPM,
With the evolution of technology that delivers media over the Internet, there have been the beginnings of big changes with analyzing television show ratings. Any new method of counting viewers will have an effect on determining CPM. A Microsoft patent on Nov. 1, 2012, reveals that XBox Kinect machines are being created to count viewers in the room. This may be used to charge viewers by how many people are watching, rather than by household. Regardless of whether household televisions or viewer totals will be used to determine ratings, using that number to calculate CPM for a television advertisement will likely remain the same.