Online publishers can take advantage of several ad pricing models. These include cost per click (CPC), cost per acquisition (CPA), and cost per ad impressions (CPM). Because manual CPM bidding is so popular, many publishers don't consider Target CPM (tCPM) an important bidding strategy for your video campaigns.
However, tCPM can make it easier for you to set a unified pricing rule on your ad inventory and significantly improve your ad fill rate and ad revenue through Google Ad Manager. As a refresher, ad fill rate relates to the percentage of ad requests you receive on your ad display.
Target CPM in Google Ad Manager is a relatively new bidding strategy — it made its way out of the beta release in December 2018.
Table of contents:
What is Target CPM?
In order to understand what is Target CPM, let’s quickly summarize what CPM stands for. It abbreviates to “cost-per-mille,” meaning “cost per thousand.” Every time publishers reach a thousand impressions, they have to pay Google a fee. Cost per impression is a popular metric as it allows publishers to spend money only when their ad is seen.
However, if you’re looking to build on unique reach and improve ad revenue you should consider target CPM. In short, a tCPM bidding strategy allows you to set an average price you pay for every thousand impressions across all your chosen inventories.
This bidding strategy is only available for video campaigns in Google Ad Manager. Google will calculate your campaign’s average CPM value to make sure it’s equal or lower to the target CPM. This way, you’re creating unified pricing rules which can be found under the Inventory tab of Google Ad Manager. But, more about that later. Let’s first start with the basics.
How does Target CPM Work?
In order to explain target CPM, we need to talk about floor prices (otherwise known as pricing rules). In short, a floor price is defined as the lowest possible price that can participate in an auction. A floor price decides who gets to auction on your inventory and who doesn’t.
For example, let’s say the first bidder returns $6 CPM and another bidder responds with $2 CPM. If you don’t have a pricing rule set, the bidding will go to a second-price auction in which the highest bidder will only have to pay a cent more than the second-highest bidder. This means that the winning bidder will pay $2.1.
However, by setting pricing rules and identifying a floor price value on each individual ad, you make it impossible for bidders to pay a lower bid price from the one that was originally set. You can then unify that with tCPM.
It’s all about the unified pricing rule
With tCPM, you will activate dynamic pricing. Regardless of the price set by the publisher, Google Ad Manager may increase or decrease your existing floor prices to match the overall tCPM set.
Target CPM looks at the minimum price across all sold impressions rather than just a single inventory. It calculates an average and sets the price floor based on that amount. It will increase the dynamic floor price when the publisher’s inventory receives multiple bids and high competition. While some impressions may cost more, altogether Google Ads will make sure your campaign standard is either lower or equal to the tCPM you set.
Target CPM is used to increase fill rates and the dynamic floor price, along with improving your ad revenue. Of course, there are a few exceptions.
For example, the target CPM can’t be reached when the rule is new or doesn’t have enough data available for full optimization. It also can’t be used when an ad experiences unusual fluctuation in the inventory traffic. This feature is optional. You can use it for First Look and unified pricing rules as opposed to setting each individual floor price value.
How to set a target CPM in Google Ad Manager?
Through Google Ad Manager, publishers can set their target CPM. Here’s a step-by-step guide on how to set target CPMs for advertisers.
For setting unified pricing rules:
On the Google Ad Manager homepage, find your way to ‘Inventory’, ‘Ad Exchange Rules’, and then select ‘Pricing Rules’. You’ll then see different options. If you’re looking to create a First Look pricing rule, select the ‘First Look pricing’ section. If you’re creating unified pricing click ‘New unified pricing rule’. In the ‘Targeting’ tab select the inventory and apply your rule. In ‘Pricing’, select ‘Set target CPMs'. Click 'Save'.
How to exclude inventories:
If you’re looking to exclude an inventory from your pricing rule go to ‘Protections’ and select ‘Inventory exclusion’.
How to optimize tCPM:
Advertisers should always monitor and optimize target CPM. It’s always best to run experiments in order to see what works and what doesn’t. To optimize your target CPMs, follow these steps:
On the Google Ad Manager homepage, select the ‘Opportunities’ tab. Click ‘View opportunities’ and ‘Opportunity type’. Click ‘Enable target CPM on unified pricing rules’. Then you should click ‘Experiment’ and name your target CPM experiment. Make sure you select your start date and end date. You should conduct this tCPM feature for at least several days to gather enough data. Choose the percentage of impressions and click the ‘Start experiment’ button. Click 'Save'.
Manual vs Target CPM: What is the Difference?
So, what is the difference between manual CPM and target CPM? Should tCPM be used by every single publisher that has access to Google Ad Manager? The short answer is no. Target CPM is a strategy in Google Ad Manager publishers should consider if they find it useful.
When it comes to manual CPM vs target CPM in Google ad displays, there are a few important key differences to consider. A publishers’ tCPM strategy should complement their manual strategy, depending on the inventory type (Display, Mobile app, In-Stream video, etc).
CPM rates tend to be relatively low, with $2.00 being a standard price value. If digital publishers are looking to sell as many impressions as possible with their ad units, they should increase traffic on their website.
This is where target CPM can step in to increase sell inventories at a reasonable value. By creating a new pricing rule and establishing unified rules, you’re making sure your ads have a better fill rate. This will filter out lower bids that would otherwise go ahead in a manual strategy and make sure your CPM standard remains healthy.
Here’s the best way to remember the difference between manual CPM and target CPM:
In a manual CPM auction model, the buyer cannot win the individual auction if they bid lower than the ‘hard price’ set by the publisher. However, when the publisher activates tCPM, GAM may accept a lower bid in order to maintain a healthy overall cost per thousand impressions.
Whether you’re choosing the manual CPM or a target CPM strategy, you should always continuously monitor performance and create various experiments to make sure your strategy is fruitful.
When it comes to header bidding, publishers should always communicate tCPM to demand partners. These bids tend to be lower than the tCPM you will be setting, which is why it’s crucial to set correlating floor prices if you’re running header auctions.
Overall, targeting your CPM may be a viable choice worth considering for publishers that are looking to set an average floor price across all ad inventories. It will help publishers gather more data, increase fill rates and bids, and keep the ad inventory healthy.
Using tCPM is a great way to improve brand visibility and get your ad in front of more people. However, an important thing to remember is that although you may end up paying money for a thousand impressions, it does not mean that your ad will receive any clicks or conversions. The latter all depends on the overall quality of the ad and your offer, which should be taken into consideration if you're using this bidding strategy.
If you’re making more than $2,000 in monthly ad revenue, contact us today to learn more about how Publift can help increase your ad revenue and best optimize the ad space available on your website or app.