CPM, CPC and CPI Explained: Meaning, Formulas and Examples
CPM, CPC, and CPI are the most common pricing models and metrics in online advertising. CPM is the cost per thousand impressions, CPC is the cost per click, and CPI is the cost per install. Here is how each is calculated, how they differ, and which model to choose.
Want to run the numbers right away? Use our CPM calculator.
What is CPM?
CPM (cost per mille) — “mille” is Latin for thousand — is the cost of one thousand ad impressions. The advertiser pays for the ad being shown, regardless of clicks.
CPM formula: CPM = ad spend ÷ impressions × 1,000.
Example: you spent $500 and got 250,000 impressions. CPM = 500 ÷ 250,000 × 1,000 = $2.
CPM pricing makes sense when reach and awareness matter, and when your ad has a high CTR: the more clicks per thousand impressions, the cheaper each click becomes.
What is CPC?
CPC (cost per click) is the cost of one click on an ad. The advertiser pays only for visits.
CPC formula: CPC = ad spend ÷ clicks.
Example: $500 and 1,000 clicks give a CPC of $0.50.
CPC pricing fits when you need traffic to your site or product and are ready to own conversion after the click.
What is CPI?
CPI (cost per install) is the cost of one install of an app or extension.
CPI formula: CPI = ad spend ÷ installs.
Example: $500 and 250 installs give a CPI of $2.
CPI is used to promote mobile apps, games, and browser extensions. Keep in mind that an install is not an active user, so watch retention too.
How the metrics connect
Between CPM and CPC sits CTR — the share of impressions that turn into clicks: CTR = clicks ÷ impressions × 100%. Therefore CPC = CPM ÷ (CTR × 1,000). With a $2 CPM and a 0.2% CTR, a click costs 2 ÷ 2 = $1; raise the CTR to 0.4%, and the click costs half as much.
Further down the funnel come CPA (cost per action) — the cost of a target action such as a signup, lead, or purchase — and CAC, the full cost of acquiring a paying customer.
CPM vs CPC vs CPI vs CPA
| Model | Advertiser pays for | Advertiser’s risk | When to choose |
|---|---|---|---|
| CPM | 1,000 impressions | a low CTR makes clicks expensive | reach, awareness, strong creatives |
| CPC | a click | traffic may not convert | you need traffic to your product |
| CPI | an install | installs without active users | mobile apps and extensions |
| CPA | a target action | minimal, but not every platform offers CPA | a clear target action and funnel |
The publisher side: eCPM
For website, app, and extension owners, the same metrics describe revenue: eCPM is revenue per thousand impressions. It depends on the number of advertisers, their bids, fill rate, and CTR.
On ExtAds, publisher revenue is calculated on a CPM basis for unique banner views in the extension. Advertisers pay a fixed placement price, and a click on the network costs 2–5x less than on other ad networks. To choose a monetization model for your product, see “Monetization Models for Digital Products”.