The Myths of TikTok CPM: Is It Really Cheaper?

So you’re considering advertising your way into the hearts of millions on TikTok. But wait – is the cost per thousand impressions (CPM) as groovy as it sounds, or are we caught in a digital myth? 

In this blog, we're putting TikTok CPM under the spotlight. Let's determine if TikTok is the cost-effective stage your brand deserves.

Understanding TikTok CPM

First things first, what is CPM? In advertising, CPM stands for Cost Per Mille, which is Latin for thousand. Essentially, CPM is the cost an advertiser pays for every 1,000 views of an ad, regardless of the platform. 

The general formula for calculating CPM is:

Now, let’s bring TikTok into the picture. On TikTok, the CPM operates under the same principle. The “Amount Spent” would be the total cost of the ad campaign, and the “Number of Impressions” would be the total number of times the ad was shown on TikTok.

However, it’s important to remember that while the CPM formula can give you a numerical value, the effectiveness and value of those impressions can vary greatly. Factors such as the quality of the ad, the target audience, and the overall strategy of the campaign can influence this.

TikTok, like many other platforms, uses an ad auction and bidding system, which are designed to help advertisers achieve their business outcomes, whether it’s driving brand awareness, generating leads, or maximizing conversions.

TikTok operates on an auction system where multiple advertisers compete for the same ad space, and the highest bidder wins. Advertisers can set a daily or campaign budget and bid based on parameters such as clicks, conversions, and impressions.

TikTok Ads Manager currently supports two main bidding strategies:

1. Cost cap (goal-based): This strategy controls the average cost per result of the auction. It’s the default bidding strategy for the reach and video view objectives and is only available for conversion campaigns when the optimization goal is set to conversion. The cost per result will sometimes fluctuate higher or lower than the bid amount.
2. Maximum delivery (spend-based): This strategy maximizes the number of results for your budget. It’s only available on daily budget campaigns and not lifetime budget campaigns. When using maximum delivery, you don’t need to enter a bid, as it seeks to generate as many results as possible against the ad group’s budget.

Advertisers can choose to bid based on CPM (cost per thousand impressions), Optimized Cost per Mille (oCPM), Cost per Click (CPC), or Cost per View (CPV), depending on their campaign goals.

So, while the CPM formula can provide a useful benchmark, it should not be the sole determinant in assessing the success of your ad campaign. It’s all about finding the balance that works best for your brand and campaign goals.

Factors influencing TikTok CPM

The Cost Per Mille (CPM) on TikTok, like other advertising platforms, depends on numerous factors. Here are a few of them:

• Ad objectives: On TikTok, you can choose advertising objectives such as reach, traffic, video views, community interaction, product sales, website conversions, lead generation, and app promotion. Each of them aligns with different business goals and can influence the way you are charged.
• User behavior: If an ad on TikTok receives high engagement (such as users spending more time watching it, viewing it multiple times, commenting, or sharing it with others), it could potentially lead to a higher number of impressions per ad dollar spent, effectively lowering the CPM.
• Target audience: The demographics and interests of your target audience impact CPM. Advertisers aiming for a niche or specific demographic may experience different CPM rates compared to those with broader targeting.
• Competition: The benchmarks for TikTok depend on the competition and the number of advertisers. While it currently boasts lower CPMs compared to Meta and Google, the increasing influx of advertisers to the platform suggests a potential rise in CPMs.
• Seasonal trends: During certain times of the year, such as holidays or big events, there may be an increase in demand for ad space. This can lead to increased competition among advertisers, which can drive up the cost of impressions.
• Ad format: Your chosen ad format can influence CPM. For example, immersive and interactive formats may differ in pricing from standard video or image-based ads. These formats offer a more engaging user experience, potentially leading to higher interaction rates and thus affecting costs.
• Ad placement: The ad placement within the app can affect CPM. Ads placed in prime positions, such as the For You Page or during popular challenges, may have higher CPM rates due to increased visibility.
• Ad quality and relevance: The quality and relevance of your ad content impact engagement rates. TikTok aims to provide users with content they find interesting, so creating high-quality ads can positively influence CPM.
• Ad performance history: TikTok considers the historical performance of your ads. Advertisers with a track record of creating engaging content and achieving desired outcomes may receive more favorable CPM rates.

What is the average CPM for TikTok in 2023?

CPM certainly depends on a variety of factors like industry, country, and ad type. Once you know what high and low CPMs look like, you’ll be able to use the insights to guide your campaign budgets in the future. 

Note that TikTok requires you to spend a minimum of $50 on a campaign. 

Now, let’s look at the CPM averages by industry, country, ad type, and season:

💼 TikTok CPM by industry

For instance, a study found that the average CPM was $12.85 for video ads, but it ranged from $8.06 in the Business & Industrial industry to $26.51 in the Ecommerce industry.

🌍 TikTok CPM by country

Like the industry, CPM for TikTok can also vary significantly depending on the country. Examining the average TikTok CPM by country reveals significant variations, providing insights into which countries generally experience the highest CPM.

The United States stands out with the highest average CPM of $9, making it a more competitive market. On the other hand, countries like Indonesia and the Philippines present lower average CPMs at $0.94 and $0.44, respectively, offering potentially more cost-effective opportunities for marketers.

 📢 TikTok CPM by ad type

When it comes to TikTok advertising, understanding the benchmarks for different ad types is crucial for optimizing your advertising strategy. We've observed a range of CPMs, providing business owners with valuable insights into potential costs and exposure.

Compare yours against these average CPMs of popular ad formats:

⭕ In-feed ads: $6.00 – $10.00 

⭕ TopFeed ads: $10.00 – $15.00

⭕ TopView ads: $15.00 – $20.00

📅 TikTok CPM by seasonal trends

Looking at the numbers, the average Cost Per Mille (CPM) follows a clear pattern throughout the year. This pattern isn't unique to TikTok – you'll observe it on other platforms like Meta, Twitter, and YouTube, too. They all go through similar ups and downs depending on the season.

For TikTok, specifically, the period from November to January sees the highest average CPM. This is because of major events like Black Friday and Cyber Monday, followed by the festive season. These months tend to be busier and more competitive for advertisers. 

On the flip side, there's a bit of a dip in CPM from March to May. But come July, get ready for a steady climb as the numbers start picking up again.

So, keep an eye on your advertising budget, especially in the months leading up to and during the holiday season. Understanding these trends can help you plan your TikTok advertising budget for the best results!

TikTok CPM vs. Other Social Media Platforms CPM

Wondering how TikTok’s CPM stacks up against other social media giants? Let’s have a friendly faceoff between TikTok and Meta and TikTok and YouTube 🥊

TikTok CPM vs. Meta (Facebook and Instagram)

Facebook’s CPM is considerably higher than TikTok’s, averaging $14.40. TikTok’s CPM range is slightly lower and stands between $9.20 and $10. Instagram has the lowest CPM average of the two, at $7.91.

You might be wondering if you should focus on TikTok and Instagram, considering they have a lower CPM than Facebook. However, that assumption is misleading— there are more factors to consider before making this decision.  

Consider this: Although Facebook has the highest CPM rate, it boasts a more broad and diverse user base compared to TikTok, which is a strong benefit if you want to scale rapidly. This extensive reach makes it an appealing platform for advertisers, especially during high purchase-intent seasons like holidays and special occasions. 

⚠️ During these extremely competitive occasions, as advertisers vie for the same number of placements, it’s good to anticipate an increase in CPM rates across all platforms. 

Twenty-five percent of TikTok users are under 20 years old, and 52.83% of them fall in the 18-24 age bracket, making it the youngest social media platform of the three. In comparison, the average age of a Facebook user is 32 years old, suggesting a demographic with more disposable income. 

Instagram has a slightly younger user base than Facebook and attracts a significant number of Gen Z users like TikTok. However, the majority of users fall between the ages of 25 and 34 years old, indicating a more mature audience than TikTok's and suggesting a higher likelihood of having greater spending power.

Other factors contributing to Meta's overall advertising supremacy include its colossal user numbers – Facebook alone has 3 billion active users, dwarfing TikTok's 834 million users. Instagram follows closely after Facebook at 2 billion users, further solidifying it as the next best choice for advertisers after Facebook.

Now, here's the scoop 📣: 

TikTok’s advertising rates are on the rise, growing at 12.28% year-on-year. That's almost twice as fast as Meta's ad rates are climbing! As TikTok continues to grow in popularity, its ad rates are unfortunately likely to increase. 

TikTok CPM vs. YouTube CPM

On average, the YouTube ad CPM is around $4-$10. So businesses may expect to fork out between $400 – $1,000 for 100,000 impressions. The Google-owned giant offers a vast audience, diverse ad formats, and extensive targeting options, making it a go-to for many advertisers looking to scale.

We already know that in the TikTok arena, the CPM typically dances around $9.5-$10 on average. 

Now, the million-dollar question is, which platform is the cash cow for brand owners and advertisers? The answer isn't a one-size-fits-all, as it depends on your specific goals, target audience, and the nature of your content.

With 20.7% of users between the ages of 25 and 34, YouTube boasts a more mature and diverse user base. Similarly to Meta, it’s more suitable for brands aiming to reach a broad audience.

On the flip side, TikTok's strength lies in its popularity among younger demographics, providing a vibrant and energetic space for brands looking to connect with the next generation.

Therefore, the choice between YouTube and TikTok ultimately depends on your campaign’s specific goals. It’s not about which platform is superior but rather which platform aligns best with your advertising strategy. 

Remember, the most effective advertising campaigns often leverage the strengths of multiple social media platforms to achieve their goals. So, why not cover all your bases by utilizing both platforms?

How to measure TikTok CPM

You've cracked the code on what TikTok’s CPM means for your campaigns. Now, let's get into the fun stuff: tracking this and other essential metrics like a pro. Effective tracking helps you gather data, analyze performance, and tweak your ads to get the biggest bang for your buck.

Let’s unpack two prominent tools designed to provide valuable insights into your TikTok ad performance:

TikTok Ads Manager

TikTok’s Ad Manager provides an overview of your TikTok performance across campaigns, ad groups, and ads. It presents current metrics, ad expenditure, and the status of all your campaigns, ensuring you stay informed.

You can easily monitor how well your campaigns are doing and quickly spot trends, spikes, and other important signs that might need a closer inspection.

Now, here’s the thing: This tool is super nifty; however, should your campaign span across multiple platforms, you’re going to have to supplement it with more reporting tools. You should prepare yourself for the tedious process of consolidating all that data into a single spreadsheet!

For those who don’t have the time to juggle multiple reporting tools and risk losing valuable data in the process, there are consolidated reporting tools available 👇

Madgicx’s One-Click Report

Monitoring your TikTok CPM is an easy dance with Madgicx’s One-Click Report. This powerful cross-channel marketing analytics tool offers a bird's-eye view of your TikTok, Meta, Google Ads, GA4, and Shopify performance. 

The best part is that pulling data from multiple channels is as easy as one click.

Get ready for a live, comprehensive overview of your marketing performance and stay in the loop on everything impacting your TikTok CPM. You'll make decisions more efficiently, armed with swift, actionable insights to optimize your budget.

Ready to have full control over your TikTok ads? 🫵 Start your journey with our 7-Day Free Trial, and continue enjoying the benefits of One-Click Report for just $29 per month thereafter. 

Ways to decrease the CPM on TikTok

As we’ve seen, CPM fluctuates all the time and is often out of our control. Fortunately, there are actions you can take to decrease it. Let’s look at a few things you can do:

Create engaging content

The first step to decreasing your CPM on TikTok is creating engaging content. The more your audience interacts with your content, the more TikTok’s algorithm will favor your ads, leading to a lower CPM. 

Here are a few tips for doing this:

• Improve ad relevance: Know what your audience likes and do more of it. Ensure your ads are both visually and aurally captivating. High-quality, attention-grabbing creatives increase user engagement, which can lower your CPM.
• Keep it authentic: Authenticity goes a long way on TikTok, so ditch the fancy scripts. Users appreciate genuine content that is not overly produced, overly promotional, or forced.
• Stay trendy: Keep up with industry trends and incorporate them into your content. This can increase your content’s visibility and make it more engaging.
• Change ads regularly: This is to avoid ad fatigue from seeing your creatives too many times. According to TikTok, you should refresh your creatives ideally once every 7 days.
• Watch your posting times: A good creative means nothing if it’s posted during your audience’s inactive time. Experiment with different times to find the best time to post on your TikTok.

Leverage user-generated content (UGC)

User-generated content (UGC) is a powerful tool for decreasing your CPM on TikTok. UGC is content created by users rather than brands, and it often feels more relatable. Here’s how you can leverage it:

• Encourage UGC: Inspire your audience to create content related to your brand. This could be through challenges, contests, or simply asking for their input.
• Incorporate UGC in ads: This can make them feel less like ads and more like a part of the user’s TikTok experience.
• Share UGC: Feature it on your own TikTok account. This not only provides you with free content but also makes your users feel valued, motivating them to create even more UGC for you.

Utilize ad types and placements smartly

TikTok offers various ad types and placements, each with its advantages. Understanding these can help lower your CPM:

• In-Feed Ads: These ads pop up right in the For You feed, aiming to grab customers' full attention with a full-screen display and sound-on feature. They’re a good option for advertisers due to their broad reach and lower cost than other ad types.

• Spark Ads: These utilize organic posts from your TikTok account or any TikTok post that you have permission to use. Use them to drive traffic to external websites or app installs. Leveraging popular posts for your Spark Ads can potentially lower your CPM.

• Brand Takeover Ads: These are full-screen ads that appear when a user first opens TikTok. They’re a little more expensive, so they’re more for brands with bigger budgets. While these may have a higher CPM, their high visibility and impact can lead to a higher conversion rate, making them cost-effective.

Use TikTok’s Branded Mission tool

TikTok has also rolled out its Branded Mission, a pioneering solution that lets advertisers source content from TikTok creators. They've introduced Top Feed and TopView CPM buying methods designed to enhance brand awareness. 

Currently, it’s available in several markets, including Australia, Canada, France, the UK, Italy, Germany, Spain, the US, Indonesia, Korea, Japan, the UAE, and more. 

It will be introduced in more markets in the coming months, potentially affecting the average CPM in these countries.

Conclusion

While TikTok's CPM tends to be lower than other major platforms, the choice ultimately hinges on your campaign objectives. Meta dominates for a broad audience and higher disposable income, while TikTok excels in viralability and connecting with a younger audience.

Yet, here's a secret weapon for your advertising arsenal: the most effective campaigns cast a wide net across all platforms, ensuring a comprehensive reach. 

In this orchestration of success, tools like Madgicx’s One-Click Report can provide a seamless overview of your campaign efforts, maximize your efficiency, and support you in generating higher ROAS ​​💰