Online advertising has experienced a significant change in recent years. Even just five years ago, publishers could earn revenue simply by placing ads on their site. It didn’t matter whether visitors actually saw those ads. Up to 56% of ads displayed were never actually viewed by visitors.
However, advertisers are increasingly only interested in bidding on viewable impressions. As a publisher, you need to understand a metric called vCPM, or cost per one thousand viewable impressions. Let’s take a closer look at what viewable CPM is, and its role in driving revenue for your sites.
vCPM stands for cost per thousand viewable impressions or viewable CPM. It’s a metric used to determine how many people actually see ads on a webpage, instead of simply how many people see the website.
- More than 50% of the ad is visible to users, and the amount of time the ad displays for those same users is longer than one second.
- Video ads have an entirely different requirement to meet – users must see more than 50% of the video and for longer than 2 seconds.
- For large-format ads starting at 242,500 pixels, users must see at least 30% and for longer than one second.
If those standards aren’t met, then the ad isn’t considered “viewed.”
What to Know About vCPM
Advertisers need to know what percentage of the ad is visible and the viewable impressions to determine the final viewable CPM—any portion of ads not visible on-screen, lying outside the fold, whether above or below, gets deducted from the whole as a percentage.
Above or Below the Fold
On average, when placing ads above the fold, ad viewability increases as these ads remain visible without having to scroll down a page. It might seem like the best option since 100% of the ad appears; however, internet users are notorious for “bouncing,” leaving the ad viewability at only 68%—though this is still an improvement, “above average” and certainly better than below the fold.
With ad placement below the fold, the ad viewability drops to 40%. Therefore, it’s best to consider keeping the design size under 728x90s. There are other ad placement options, too, like sticky ads and pop-ups, but it’s best to talk these options over with your marketing team.
vCPM vs CPM
CPM and viewable CPM often get mistaken as the same, but they differ slightly. We often see CPM (cost per mille or cost per thousand impressions) in regard to the cost of an online ad. Let’s say you see ad pricing for $2 CPM. This means you will pay $2 each time the ad is viewed 1,000 times.
CPM plays an important role in calculating how much to spend on advertising and includes all ads showcased on the website. With viewable CPM, only ads that are paid for are active and visible.
Which one is more useful? That comes down to a few things, such as advertising budget. It’s also essential to collect all relevant data on any existing ad campaigns. For instance, what is your average ad campaign click-through rate (CTR), as a percentage?
Your advertising CTR is a critical variable to the metric. Whomever your network supplier is, you need to be clear on where to look for those CTRs to plan other ad campaigns in the future, especially for running ad campaigns based on impressions. Both CPM and vCPM ads are impression campaigns and priced according to impression values.
To create an ad campaign using a vCPM plan, say we have the following variables:
- Ad viewability: 68% (the average for ads placed above the fold)
- Ad campaign budget: $100,000 (a portion of a company’s advertising budget)
- CPM: $1.25 per click
- Total impressions: 25,000,000
- Viewable impressions: $12,500,000
- The maximum vCPM bid (another goal): $5.00
For vCPM, there are several formulas. To keep things simple, we will use:
Budget ÷ [(Total Ad Impressions * % of Ad Viewability) ÷1000] = vCPM
You may recall reading earlier that you need the percentage of the visual field. To qualify, 50% or more of the ad must be visible and for more than one second. If we take the variable as outlined above and plug into the formula, it should appear as below:
$100,000 ÷ [(25,000,000 * 0.68) ÷ 1000) = $5.88
The result tells us that each viewable CPM is $5.88 since 68% of the ad is within the visual field for longer than 1 second, as outlined in the IAB standards.
What Does a High vCPM Mean?
The exercise completed above indicates this investment is slightly over budget for each viewable impression since the average cost per vCPM is $5.00. Therefore, resulting in fewer viewable ad impressions. The goal is to drive the price down, increase the number of visual impressions, and realize a greater return in the end for the dollars invested.
How to Improve vCPM
There are multiple formulas for getting the same result. The most effective way to improve a company’s return is to test numerous variables side-by-side. Conduct a thorough analysis and complete all due diligence necessary before engaging network advertisers about pricing and planning. The goal is to find the best solution for a company’s strategic advertising plan and budget.
It’s essential to evaluate and measure the goals and outcomes relative to the investment cost using the right performance metric. What’s most important to remember when calculating the return on investment for vCPM is the cost variable you are trying to measure.
To make an informed decision using vCPM, analyze running the ads using all the variables needed for a successful campaign.
Of course, there’s always more than one way to measure advertising performance for a positive investment return—identifying the key performance indicators, or KPIs, is just one way to strategize an ad campaign. Make sure to gather all critical data to include in the metric for the best outcome.