With 4.66 billion internet users worldwide and over 2.14 billion digital buyers, it is no surprise that digital advertising is making more money than ever before.
It can be overwhelming for small websites and those new to the advertising game to try and understand all the different advertising terminology and how it will impact their ad campaigns.
One such term is CMP, which stands for cost per mille. This article looks at CPM advertising, a common method used to determine just how much bang you are getting for your ad spend buck.
CPM, one of the key advertising metrics, stands for cost per mille, meaning the cost per thousand impressions (or how many times it is seen). In other words, it refers to the cost of having an ad published and seen a thousand times on a website and is used to monitor ad performance. CPM has been an industry standard for determining advertising costs and pricing web ads since online marketing campaigns began.
The total cost paid in CPM campaigns is calculated by multiplying the Total Impressions by the CPM rate & then dividing it by one thousand. For example, one million impressions at CPM equals $1000 in gross revenue.
What is a Good CPM?
As with most digital marketing metrics and pricing models, you can’t determine if a CPM is good or bad based only on a single value. Analyzing past performance data, benchmarking results against averages for your market, and evaluating the impact of CPMs on your ROI can help you determine whether your CPM impressions are a good pricing model for your advertising endeavors.
A lower CPM is not always a positive indicator for an advertiser, as it may be an indication of poor quality traffic. Similarly, For publishers, having a high CPM doesn’t necessarily translate into higher earnings, as some ad inventory may not be sold.
Factors Affecting CPM
Several factors can influence the value of CPM.
- Geography: Average CPM will be influenced by how developed the online industry is in a given country, and the spending power of the inhabitants of that country. CPMs in the US, Europe, Australia, or Japan will be, on average, higher than in Egypt or Brazil.
- Data usage: Targeted ads using available data to build a user profile will command higher CPM campaign prices than just buying the ad space without segmenting the target audience.
- Device: Ads served on mobile devices have a lower CPM than on desktop due to screen size limitations, lower CTR, and conversion rate.
- Website topic and quality: Niche and premium publishers are able to have a higher CPM as they have a more segmented and homogeneous audience than a generic news site. As more businesses factor brand safety when evaluating ad placements, higher quality websites are able to command higher prices as well.
- Ad size: On average, larger ad formats have a higher CPM, as they are more prominent and more likely to entice action from the user. But the most common ad sizes, even though not the largest, also generate higher CPMs.
- Ad viewability: The definition of viewability depends on the ad format, but for display ads, Google, IAB, and MRC define viewability as having at least 50% of the ad on screen for a minimum of 1 second. A publisher with a low viewability score will see their CPM rates drop drastically.
- Past performance: Advertisers value traffic quality and are keen to pay higher CPMs for placement in sites that drive conversions and a higher ROI.
- Number of ad units on page: A higher number of ad units will drive down the CPM rates. A bigger supply will result in lower bids for those ad units.
- Seasonality: Traffic has some seasonality within different industries, leading to changes in CPM rates. Summer can see a decrease in spending, particularly in Europe as many people take time off work for holidays.
Why is CPM a Key Metric?
CPM continues to be an important metric for publishers and advertisers, even though analysts and strategists now have a wealth of data and metrics available to measure user engagement and ad effectiveness.
Here are some areas in which CPM is a beneficial metric for advertisers:
- Brand awareness: For advertisers with a focus on brand visibility, then the CPM metric will let them know approximately how many people they’re reaching online with their budget.
- Campaign performance: Combined with other metrics such as CTR and conversion rate, it’s a key performance indicator that allows advertisers to evaluate their investment on your website.
What is a CPM Campaign?
An online ad campaign based on Cost Per Mille (CPM) is when advertisers pay a determined amount per thousand ad impressions via automated bidding or direct negotiation to the publisher.
This pricing model for selling ad space is one of the most profitable for publishers, as they are compensated for each ad served, independent of the user action. Another advantage for publishers is that it’s a predictable revenue, and they have complete visibility to the value delivered to the advertiser. In this case, ad impressions.
But a CPM deal might not be the most optimal type of campaign from a revenue standpoint. If there’s a good match between an advertiser and the publisher’s audience, other campaign modes, like cost per action, might generate higher revenue.
How to Optimize CPM
Prepare for Seasonal Variations
It’s important to know when to expect seasonal variations in CPM rates so you can better benchmark your performance and forecast future revenue. Look at your past data and see where you tend to see dips in your CPM. Think about your industry from a buyer’s perspective. If you run a dating website, then February will be a big month for you as advertisers will heavily increase spending around Valentine’s day. If you run a personal finance website or health and fitness blog, then the January Blues may be your pot of gold as consumers rush to your websites to start their New Year’s resolutions richer and healthier.
Knowing when to expect these fluctuations will prevent you from getting caught off guard when a drop comes rolling along and help you plan cash flow around these times. We would suggest not to make any dramatic changes during a slump and use the time to work on upcoming content to take advantage when advertisers are buying big. If you need to do any testing on your site, the first month of the quarter is a good time.
The last month of the quarter, Black Friday, and Christmas periods, are not a good time for a site redesign to go live or to run another testing that may affect the site. Our account managers at Publift are experts in anticipating trends and build these into your ad management, so you don’t have to worry about it.
Place Your Inventory on a Supply Side Platform
In order to try to generate higher Google CPMs, you can place inventory on a supply-side platform to open your ad inventory to more advertisers. If you have a niche audience or a high-quality website, more competition for your ads will increase the CPMs.
Another action you can take is to test and experiment with ad formats and ad placements to increase ad viewability.
Another path to improve revenue is to focus on fill rate. Even with a lower cost per thousand, you can increase overall earnings by improving the fill rate of your ad placements.
CPM is a Health Indicator of Your Revenue Streams
Display advertising is the primary revenue source for the vast majority of websites. It’s easy to deploy and to scale, and it’s still in high demand by advertisers. What is CPM? – it is a primary but key metric to measure revenue for every thousand impressions.
Monitoring cost per thousand rates will help you assess the performance of your ad inventory for every thousand impressions and take actions to optimize your revenue streams. To do that, it’s essential to understand what influences CPM rates and the seasonality of these changes.
Each publisher will have to consider different factors to determine a reasonable CPM rate for their ads. Still, it’s important to note that higher CPMs, while being a positive indicator, need to be contrasted with other data, like the fill rate of your ad placement.
One thing to mention is that AdSense reports this as RPM. This benefits the publishers because it means that if your website has high traffic, selling on a CPM model could be an easy way of monetizing your content. If you’re confused about the difference between CPM and eCPM, check out our guide to eCPM. To learn more about the other most common advertiser and publisher metrics, check out our guide to CPM CPC CPA and CTR.