CPM Paid Ads Costs Are Rising—Now What?

If you’ve been running paid ad campaigns in 2024, you’ve likely noticed a growing trend: CPMs (Cost Per Thousand Impressions) are climbing steadily across all major marketing platforms. But what exactly is a CPM?

Think of it like paying for billboard space online. If you pay a $10 CPM, you pay $10 for every 1,000 times your ad shows, whether someone clicks on it or not. So, if your ad gets 50,000 views, your total cost would be $500.

For ecommerce brands in beauty, fashion, and wellness, rising CPMs are like rising rent on your virtual ad space. The higher the CPM, the more expensive it becomes to reach your audience. This poses a serious challenge—eating into ad budgets, reducing profitability, and making it harder to scale campaigns.

At Rally, we’ve partnered with over 50 ecommerce brands, refining strategies to thrive in this evolving landscape.

Here’s a deep dive into why CPMs are rising, how this impacts your ecommerce brand, and what you can do to maintain performance and profitability.

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Why Are CPMs Rising?

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Several factors are driving the increase in CPMs on paid ad channels:

1. Increased Competition: As more businesses shift their budgets online, the competition for ad space on platforms like Meta, TikTok, and Google has intensified.
2. Seasonal Fluctuations: Peak shopping periods, like the holidays, drive higher demand for ad inventory, pushing CPMs to new heights.
3. Privacy Changes: Updates like Apple’s iOS 14 have reduced the effectiveness of traditional targeting, forcing advertisers to rely on broader audiences, which can drive up costs.
4. Ad Platform Optimizations: Platforms are continually adjusting algorithms to favor higher-quality ads, which often come at a higher CPM.

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The Impact on Ecommerce Brands

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For ecommerce businesses, especially those in beauty, fashion, and wellness, rising CPMs create several challenges:

• Higher Customer Acquisition Costs (CAC): With CPMs rising, your cost to reach potential customers increases, leading to higher CAC.
• Tighter Margins: Unless you adjust your pricing or ad strategy, rising ad costs can significantly reduce profit margins.
• Scaling Challenges: Higher ad costs make it harder to scale campaigns profitably, especially for smaller brands.

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How to Adapt and Protect Your Brand

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Despite these challenges, rising CPMs don’t have to derail your ecommerce business. Here are actionable strategies to maintain performance and profitability:

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1. Focus on Creative Excellence

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Ad creative is the most controllable variable in your campaigns. High-performing creative can improve engagement rates, which helps lower your CPM and boosts ROAS (Return on Ad Spend).

• Test Hooks Early: At Rally, we always test multiple hooks within the first 3 seconds of a video to identify what grabs attention.
• Leverage UGC: User-generated content feels authentic and often performs better than polished studio ads, especially in the beauty and wellness industries.
• Dynamic Creative Optimization (DCO): Use tools like Meta’s DCO or TikTok’s dynamic ads to deliver the best-performing combinations of headlines, visuals, and CTAs.

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2. Prioritize First-Party Data

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With the shift toward privacy-first advertising, first-party data has never been more valuable. Build your email and SMS lists to create owned audiences that are immune to rising CPMs.

• Capture Data: Use pop-ups, quizzes, and loyalty programs to collect customer information.
• Retarget Smarter: Retarget existing customers and warm audiences who are more likely to convert.
• Leverage Lookalikes: Build lookalike audiences based on your best customers to maintain targeting precision without relying on third-party data.

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3. Optimize Your Funnel

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A leaky funnel wastes valuable ad spend. Focus on improving your customer journey to maximize the value of every impression:

• Landing Page Optimization: Ensure your landing pages are fast, mobile-friendly, and aligned with your ad messaging.
• Upsell and Cross-Sell: Increase AOV (Average Order Value) with post-purchase upsells and cross-sells.
• Abandoned Cart Emails: Recover lost revenue with automated email flows targeting abandoned carts.

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4. Diversify Your Channels

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Relying too heavily on a single ad platform increases risk, especially in the face of rising CPMs. Diversify your media mix to spread costs and find efficiencies.

• Explore TikTok: TikTok’s lower CPMs and high engagement rates make it a great platform for beauty and fashion brands.
• Invest in Pinterest: Pinterest ads work well for wellness and beauty brands, offering lower competition and high intent.
• Test Google Performance Max: Google’s Performance Max campaigns consolidate inventory across multiple channels for better efficiency.

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‍5. Track and Optimize ROAS in Real Time

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Tools like Motion App give ecommerce brands the ability to monitor creative performance and ROI daily. By identifying winning creatives and underperformers quickly, you can allocate your budget more effectively.

• Creative Testing Workflow: Test new creatives weekly to keep campaigns fresh.
• Use Automation: Automate bid adjustments and budget shifts to optimize ROAS dynamically.

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Looking Ahead: The Future of Paid Ads

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As CPMs continue to rise, the brands that thrive will be those that innovate. Here’s what to expect in 2025:

• AI-Driven Advertising: Artificial intelligence will play a larger role in optimizing ad spend and creative testing.
• Shoppable Content: Platforms like TikTok and Instagram will continue integrating shopping features directly into ads, streamlining the purchase journey.
• Privacy-First Strategies: Ecommerce brands will need to lean further into first-party data and owned channels.

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Final Thoughts

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Rising CPMs can seem tough, but they also offer a chance to improve your strategy. This can help you create a stronger business. At Rally, we specialize in helping ecommerce brands in beauty, fashion, and wellness adapt to these changes and stay ahead of the curve. If you’re ready to optimize your paid media strategy for 2025, let’s chat.