CPM (Cost Per 1,000 Impressions) may be the most impactful and frustratingly erratic metric when it comes to your Meta ads performance. How much it costs to reach people can override the greatness — or terribleness — of your ads.

Some of the choices you make will contribute to CPM in a positive or negative way. But, other factors can result in temporary or random CPM spikes that can lead to a misunderstanding of performance.

I’ve been guilty of this, too, and it led to this blog post. I want you to avoid this mistake while understanding how this sometimes invisible force can impact performance — and the perception of performance.

Example

I ran a lead generation campaign for two months to promote my Beginner Advertiser lead magnet that was reasonably efficient at $2.24 per lead. The problem was that the lead magnet it promoted wasn’t for my optimal audience.

I offer a Beginner Advertiser email sequence because it’s something to get people started. But given the choice, I’d prefer to promote one of several other lead magnets that appeal to the intermediate to experienced advertiser.

Unfortunately, I’ve struggled to get the same results lately with these other lead magnets. Leads often cost at least twice as much as those for the Beginner offering. Knowing that, I often abandon these campaigns rather quickly and go back to the one I know works.

The latest example is a lead magnet for my Cornerstone Advertising Tips. What I love about this lead magnet is that it is a much longer commitment. While the Beginner offering is over after eight quick emails, Cornerstone is a weekly tip that will go for several months. It’s also much more advanced than the option available for beginners.

I’ve spent more than $200 to promote Cornerstone so far, and the results just aren’t close. I’m spending $5.41 for these leads, which is more than twice what I pay for beginners.

The assumption was that the offer for Cornerstone just isn’t as appealing to a wide-ranging audience the way Beginners is. I’d likely need to spend more time on the ad copy and creative to improve it, but that CPA gap may be too much to overcome.

But, once I started scratching below the surface, it became a bit less discouraging. It didn’t take long to realize that there was nothing wrong with this lead magnet. The cost discrepancy could be traced almost entirely to CPM.

As you can see in the example above, the difference in costs isn’t due to the offer or conversion rate. An impression for the Cornerstone offering is more likely to produce a lead (.59%) than an impression for Beginners (.41%). In each case, about 1% of those reached became a lead.

The biggest difference here is CPM. It costs 3.2 times more to reach people when promoting Cornerstone than when promoting Beginners.

Note that ad sets utilizes nearly identical settings:

So, what’s causing this? I have a theory, but I’ll get to that later.

First, let’s dig a bit deeper into the various factors that contribute to CPM — both within and outside of our control.

Are You Driving Up CPM?

First of all, know that there are several ways that you can drive up CPM and make things more difficult for yourself.

1. Targeting Restrictions.

If you choose to forgo Advantage+ Audience in favor of original audiences, you’ll have the option of further limiting your potential audience.

When custom audiences are provided with Advantage+ Audience, they are only used as an audience suggestion.

But, if you provide a custom audience when using original audiences, you can choose to limit targeting to those people only.

Additionally, detailed targeting and lookalike audiences are used only as suggestions with Advantage+ Audience. In some cases, you can limit targeting to those inputs when using original audiences (in other cases, the audience may be expanded).

Of course, those who choose to use original audiences do this so that the audience can be restricted. But, that restriction also limits the algorithm, which often drives up CPM.

2. Demographics

When using Advantage+ Audience, only an age minimum set in Audience Controls is considered a hard constraint. Otherwise, gender and age ranges are considered audience suggestions and the algorithm can go where it needs to go to find your desired action.

If you switch to original audiences, you can prevent ad delivery to people outside of your age range and gender inputs. While this provides more control, it applies a restriction to delivery.

There are cases when limiting demographics can make sense. But, many advertisers assume it’s necessary when it’s not. That assumption can drive up CPM.

3. Geography.

There’s no secret that some countries are much more expensive than others to reach due to advertiser competition. I primarily target the United States, Canada, United Kingdom, and Australia knowing that it will cost more to reach people there, but there tends to be an acceptable tradeoff. You may not have a choice here, but the countries you target will impact CPM.

Some geographical decisions are avoidable, though. If you choose to limit your audience to certain regions, states, or cities, that limitation restricts your potential audience size. While you might have a good reason for this, expect a higher CPM.

4. Placements.

Meta wants you to use Advantage+ Placements, which makes all placements available for delivery. If you want, you can manually remove placements, which will limit potential options for the algorithm.

Sometimes it makes sense to remove placements to prevent the algorithm from finding low-quality actions that can happen in specific locations. But in other cases, you may do this unnecessarily and hurt performance.

5. Estimated Action Rate.

One of the factors that impact your performance in Meta’s ad auction is the Estimated Action Rate. This is the estimate of the probability that a person will engage with your ad. A high Estimated Action Rate could help you win the auction with a lower bid. A low Estimated Action Rate could have the opposite effect.

Essentially, this is all about creating ads that inspire the action that you want. If you don’t do this well, you can drive up CPM.

6. Low-Quality Ads.

Another factor that contributes to auction performance is ad quality. This has nothing to do with Estimated Action Rate. Instead, Meta uses signals from users to detect click bait, engagement bait, and other signs of low-quality ads that push the lines of the ad policy. Low-quality ads will lead to higher CPM costs.

Uncontrollable Factors

While your micromanagement of an ad campaign can drive up CPM costs, there are other factors that are completely outside of your control. While you could conceivably include industry in the mix here, I want to focus on things that are variable from day to day or week to week (your industry tends to be static).

1. Competition.

The more money in the system looking to target the same audience you want to reach, the higher your costs can go. This can be due to seasonal competition, and tends to be reflected in spikes beginning before Black Friday and dropping after the new year.

But, there can also be completely random competition increases as well since you don’t control what other brands and advertisers choose to do.

2. Learning Phase.

Ad delivery and performance are least stable during the Learning Phase. You’ll often see this reflected in an inflated CPM during this time. Even when my ads never enter learning, I’ve found that CPM tends to be higher during the initial days of the ad set.

3. Randomness.

Sometimes you just can’t explain it. CPM costs can rise and fall for no particular reason. More accurately, there’s certainly a complicated reason that combines several factors that mostly happen behind the scenes, but you won’t always have a clear reason to explain it.

In other words, you shouldn’t obsess over CPM since there’s always going to be a randomness to it that is unpredictable and can’t be controlled.

CPM is a Secondary Metric

CPM is an important metric, we can’t deny that. As you saw with my example at the beginning of this post, you can have everything else go right, but an inflated CPM can drastically alter your perception of a campaign. The opposite can happen, too. Maybe your campaign and ads are nothing special, but a low CPM can get you great results.

All this said, we can’t treat CPM as a primary metric. It’s not a Key Performance Indicator (KPI). In most cases, don’t make drastic changes to your advertising in an effort to lower your CPM.

The exception, of course, would be if you are otherwise restricting ad delivery in ways that you shouldn’t, and your micromanagement is driving up CPM. If you’re limiting ad delivery by demographics or placements, or using original audiences over Advantage+ Audience, it’s worth trying a more hands-off approach.

But, changing your performance goal or targeting the cheapest countries in an effort to get your CPM down is unlikely to get you better results. A lower CPM does not guarantee an acceptable Cost Per Action. It will be up and down, and it’s mostly best to understand that it’s a factor that is mostly outside of your control.

My Theory

Back to my example at the top. The one benefit of looking at CPM in that case is that it reassured me that I wasn’t necessarily doing anything wrong. It wasn’t a matter of people preferring the Beginner offer over Cornerstone. People were telling me (through their action rate) that they liked it just fine.

As noted, the setup of the Beginner and Cornerstone ad sets were nearly identical. Both used Advantage+ Audience with similar audience suggestions. Both used the same performance goal and left Advantage+ Placements on.

My theory is that because all performance indicators are positive, I just need to be patient. I’ve started, stopped, and tried again with two different ad sets so far that totaled four days and $200 in ad spend. While those early results seemed bad on the surface (which led me to make that first decision to turn it off), I need to let it keep going.

Strangely, the Learning Phase does not apply here. I don’t believe it was ever on. But, that doesn’t necessarily mean that my ad set will immediately deliver optimally.

I decided to go back and look at results at several of my ad sets during the first week compared to its overall average, and I found a common trend: CPM almost always starts high and trends downward after the first few days or week.

The other possibility is that the build-up to Memorial Day Weekend contributed to increased competition. I think it’s possible this is a minor factor, but I have my doubts that it’s the primary driver.

Your Turn

Have you seen that CPM impacts ad performance? What do you do about it?

Let me know in the comments below!