Recently, as a client was considering a campaign we'd proposed, they pushed back on the total cost of the program, comparing the output on a cost per thousand (CPM) impressions basis to what they could get if they simply purchased ads themselves. The problem was that they were missing a major data point in their mathematical equation.

This blog post was originally published on Forbes on September 15, 2020

For context, CPM is a simple formula of ([total ad spend]/[total impressions]) x 1000. There are many online calculators to make it easy to determine.

The nice part about CPM is that it gives an apples-to-apples comparison of the cost of exposure on a given platform. If you have a $5 CPM on YouTube and a $3 CPM on Facebook, is the extra cost worth it for YouTube? If your blog post costs end up at a $35 CPM, does that mean you should stop writing them and move everything into Facebook? CPM is a valuable, although not conclusive, data point.

Where CPM comparisons fall apart is when you're comparing apples to the proverbial different fruit. In an influencer program, the total cost of production (i.e., agency fees, influencer fees and media fees) can be rolled into a single cost, often with guaranteed results.

So that client comparing the total influencer cost to the $5 CPM they could get on YouTube is leaving out all the costs associated with creating branded YouTube content in the first place. For major brands, this typically involves agency fees, talent fees and production costs that can easily run into the hundreds of thousands of dollars for a typical commercial.

A better metric for comparing the different options available is what we call complete CPM (CCPM), which factors in the costs of producing and distributing the content.

The formula for complete CPM is ([all costs of production and ad buys]/[total impressions]) x 1000.

Here's an example: For a TV spot that ends up on YouTube, let's say we have $300,000 in production costs, including talent costs, $50,000 in agency fees, and a $50,000 YouTube buy at a $5 CPM. The 10,000,000 impressions purchased now have a CCPM of $40.00. This is eight times the picture created by a CPM-only view. 

Now let's compare that to a $200,000 influencer program that includes influencer fees, agency fees and paid syndication of high-performing content. In this example, we'd deliver 12,500,000 impressions and 405,000 video views (minimum guaranteed). If we count each video view as a simple impression, we're delivering a CCPM of $15.49 (or better, if impressions exceed the minimum). This method is more than twice as efficient as the first example at $40.00.

Of course, under other situations, a brand buy can be more efficient. Let's take a lower-cost production combined with more media spend. In this third example, we have $50,000 in all production costs and agency fees and $150,000 YouTube buy to show this brand content. In this example, the brand ad buy has a CCPM of $6.66. Both the $40 CCPM and the $6.66 CCPM for brand buys are within the realm of possibility as production costs are highly variable.

Regardless of how the math plays out, there are more factors than CCPM to consider for brands choosing one marketing tactic over another. These include the value of third-party influencers lending their voice to support a brand and the value of the content they produce for the brand. Influencer-produced content can be used in other ways if the licensing is arranged in advance with the creator.

For a brand buy, there's the benefit of being in complete control of the brand messaging, down to the finest detail. There's also the potential for efficiency by creating multiple brand assets at one time and using them across a variety of platforms, which would improve the CCPM calculations.  

There's no single correct answer. Most brands we work with have made a conscious decision to invest in both brand assets and influencer assets. The most important factor, however, is that when comparing the cost of one versus another, be sure to calculate the true cost of either method. Not doing so could lead a brand down the wrong path based on false assumptions.