If you are an advertiser or a digital marketer, “TikTok CPM” is probably a term you hear a lot. Despite being an important metric that can guide your advertising strategies, many people are still clueless about what it means and how it works.
Therefore, in this topic, we will explore the importance and implications of CPM on the popular video-sharing platform. Moreover, we will also include some tips and learning points from our own experience to make sure you can get a complete understanding of this metric.
Table of Contents
What is TikTok CPM?
CPM, which stands for Cost Per Mille (or Cost Per Thousand), refers to the cost advertisers pay for every 1,000 impressions of their ad. It represents the expense incurred by the advertiser for reaching a thousand users with their ad, regardless of whether the users interact with the ad or not.
How to calculate your TikTok CPM?
To calculate your TikTok CPM, follow this formula:
Let’s imagine if you spend $500 in your ad campaign, and gain a total of 3000 impressions, your CPM is (500/3000)*1000 = $17/mile. What this means is that you have to pay $17 per a thousand impressions.
So, what exactly do you need to do in order to get the right CPM? Follow the steps below!
Step 1. Determine the total cost of your advertising campaign. This includes all expenses related to running the campaign, such as ad creation, platform fees, and any additional costs incurred.
Step 2. Identify the total number of impressions generated by your campaign. They are the number of times your ad was shown or displayed to users, calculated by Reach (The number of people who view your ads) multiplied by Frequency (The number of times your ad is shown to 1 user) .
Step 3. Divide the total cost of the campaign by the total number of impressions.
Step 4. Multiply the result by 1000
The final value you obtain using this calculation will represent the cost you incurred for every 1,000 impressions of your ad. It allows you to compare the cost efficiency of your campaign across different platforms, ad formats, or time periods.
What does TikTok CPM mean for your businesses?
There’s no doubt that CPM is a crucial metric for the cost-effectiveness of your TikTok ad. So, you might be wondering: During which stage of the ad process that you’ll need to calculate your CPM? To answer your concern: CPM can be used as a bidding cost when setting up your ad group, while also serving as a metric to assess and monitor your campaign’s performance.
A bidding cost to run ads
If you decide to run In-feed ads or Spark Ads, remember that TikTok uses CPM as a way to charge those ads. During the campaign setting process, you can choose to either set your daily budget or skip it; however, we would recommend small businesses fill in your budget at this stage. So, keep in mind the budget benchmark that TikTok has required before you decide to run the ads:
- Campaign Level Minimum Budget: For both daily and total budgets, the minimum requirement is $50
- Ad Group Level Minimum Budget: Daily budgets for ad groups must exceed $20.
In the ad group creation, a suggested CPM will be filled automatically based on your pre-filled budget. This will allow your ad to be delivered to as many people within your audience range as possible.
You can feel free to remove the existing bid and replace it with a bid that is more suitable for your budget.
Assess the cost-effectiveness of the campaign
After publishing your ad, analyzing your CPM can help you assess the cost-effectiveness of your campaigns. Thanks to CPM, advertisers can determine which options deliver the most impressions at the lowest cost by comparing CPM rates across different platforms, ad formats, or campaigns. As a result, you will be able to optimize your advertising budgets and allocate resources more effectively.
A low CPM suggests efficient ad delivery and the potential to reach a larger audience within a given budget.
On the other hand, a high CPM indicates a relatively higher cost for every 1,000 impressions of the ad, which may be less cost-effective. It can be a result of various factors such as increased competition, specific targeting criteria, premium ad placements, or the nature of the audience being targeted.
What is the average TikTok CPM?
Based on the guaranteed impressions, each type of ad formats will come at a different CPM range.
In-feed Ads & Spark Ads
For In-feed ads and Spark ads, the average TikTok CPM can vary from $10 to $30. There might be instances where the CPM exceeds, or falls below the average numbers.
TopView Ads
These ads are also full-screen videos, but they appear at the top of the For You page. TopView ads are less expensive than Brand Takeover Ads, but more costly than In-Feed Ads. The cost starts at around $20 for every 1,000 impressions.
Hashtag Challenge Ads
Hashtag Challenges encourage users to participate in a hashtag challenge created by your brand. They are a great way to reach a large audience and generate engagement. The cost for these ads starts at around $5 for every 1,000 impressions, but you will need to pay at least $150,000 to sponsor the hashtag for a whole week.
How to get a low TikTok CPM?
Any advertisers who have run TikTok about 2-3 times would know that it is not easy to get a low CPM on TikTok. The number can fluctuate easily as it depends on both creative and scheduling elements. Therefore, to avoid getting a high CPM, you can consider trying some of our recommended tactics down below:
Improve ad relevance
Relevance is the key factor that can keep or lose your audience’s interest, as no-one would want to watch an ad that doesn’t speak to their needs. That’s why you need to create engaging ads that address your audience’s problems and offer the solutions they desire.
Beside a good content that tackles their pain points, make sure your ad is both visually and aurally appealing. High-quality, authentic, and attention-grabbing content can increase user engagement, which in turn can positively impact your CPM.
Let’s look at this amazing Spark ad from @thewobbles, a crochet start-up founded by an AAPI couple in the US.
The ad effectively created an authentic experience for the audience by addressing the challenges faced by crocheters, which is why they could present their product in a positive and natural way. Additionally, the brand utilized various TikTok optimization tools such as CBO, VBO, and ACO to enhance the performance of their ad.
The results? The ad saw a 25% decrease in CPM, and 18% decrease in CPA! Impressive numbers thanks to relatable content and ad optimization.
Change ad regularly
One reason can also be that your audience has caught ad fatigue from seeing your creatives too many times. According to TikTok, you should refresh your creatives ideally once every 7 days or at least once every 2 weeks.
Schedule your ad strategically
You may have a good creative, but if your ad is uploaded during your audience’s inactive time, most of the effort can be for waste. Hence, we recommend you to experiment with different times of the day or days of the week to figure out what is the best time to post on your TikTok. By running your ads during peak engagement periods, you can potentially reach more users, increase interactions, and potentially lower your CPM.
Try different TikTok ad format
You can experiment with different TikTok ad formats available in order to identify the most cost-effective option for your campaign goals.
For small businesses with tight budgets, we suggest using Spark ads. Not only is Spark ad more cost-effective than other premium ad options, but the brand can also actually assess which videos are performing better to decide which would be run as an ad.
Studies also show that TikTok users have a tendency to engage with Spark ads longer due to their authenticity, hence reducing the CPM.
But, does a low TikTok CPM alone determine your ad success?
It’s important to understand that CPM is only a small part of the equation. You may have a high CPM, but then a good profit margin. Does that mean you have to rebuild your ad from scratch again? Absolutely not! In the end, it all depends on your campaign objectives:
- If you aim to increase your brand awareness and reach, a low CPM can be a good determinator to see if your campaign is cost-effective
- If your goal is to improve traffic for your website or your landing page, a low CPC is what you should pay attention to.
- Finally, if your ultimate goal is about sales and profit, you should aim toward a high ROAS.
Other than that, you should also review your industry benchmark and your target audience’s media insights to make sure that you are using the right metric, and the right KPI to measure your campaign’s success!
Get ready to run TikTok ads!
We hope the article has given you a clearer understanding of TikTok CPM and how you can optimize this metric. However, like we have stated, CPM is only a small link to a whole chain. The whole process of running effective ads requires much more expertise and experience, which is why it can be overwhelming for beginners.
Lucky for you, we’ve got just the thing you need: A complete guide on how to run TikTok ads in 2023. It’s packed with valuable insights, tips, and tricks to help you navigate the TikTok advertising landscape like a pro. So, don’t miss out on this opportunity to tap into the vast audience of TikTok users and take your business to new heights!
