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, with the rise of digital advertising, advertisers pay increasingly more in bidding on viewable impressions. As a publisher, you need to understand a metric called vCPM, or cost per 1,000 viewable impressions. Let’s take a closer look at what vCPM is, and its role in driving revenue for your sites.
Table of content:
• vCPM Definition
• vCPM vs CPM
vCPM—or viewable CPM—stands for cost per thousand viewable impressions. It’s a metric used to determine how many people actually see ads on a web page, instead of simply how many user see the website.
What constitutes a view?
- More than 50% of the ad is visible on the user screen, 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 ads 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 percent in view of the ad is visible and the viewable impressions to determine the final vCPM—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 the Fold
On average, when placing ads above the fold, ad viewability increases as these ad units 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.
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.
While the real estate directly above the fold is widely regarded as the most viewable position, there is no conclusive evidence to suggest that one position or structure is superior to another.
Since every business is unique, it makes sense to figure out what works best for you in order to keep your users engaged.
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) regarding the cost of an online ad. CPM plays a vital role in calculating how much to spend on advertising and includes all ads showcased on the website.
Advertisers who pay on a CPM basis pay for all ads that appear on a webpage. 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. Whether it is viewable or not, advertisers would pay what they've bid during the auction.
On the other hand, vCPM refers to the cost per thousand viewable impressions. This means that advertisers are charged based on 1,000 viewable impressions of the ad placed rather than the ad served.
Advertisers use CPM to pay for all adverts that appear on a webpage. While using vCPM, advertisers only pay for active and visible on a user's screen. The ad's viewability is crucial in deciding the campaign's cost. Buyers that want to raise brand recognition are more likely to employ vCPM.
Which one is more useful?
That comes down to a few things, such as the advertising budget. It's also essential to collect all relevant data on 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 priced according to impression values.
vCPM Formula: How to calculate vCPM?
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 campaigns 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
Formula to calculate vCPM:
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 ad impression since the average cost per vCPM is $5.00. Therefore, resulting in fewer viewable ad impressions. The goal is to drive the viewable cost down, increase the number of ad impressions, and realize a greater return in the end for the dollars invested.
How to Improve vCPM?
It's clear that vCPM is an emerging metric that is based on ad viewability. So, here are some tips and suggestions for publishers to improve viewability and increase 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. Publishers shall conduct a thorough analysis and complete all due diligence necessary before engaging network advertisers about pricing and planning.
To deliver an increase in vCPM, publishers should work on improving ad viewability strategies. What’s most important to remember when calculating the return on investment for vCPM is the cost variable you are trying to measure.
Publishers' earnings may suffer as a result of vCPM when compared to standard CPM. Use heatmap tools to identify parts of the website that generate the most user-interaction.
In the long run, however, effective use of ad viewability indicators can result in an improved ad positioning system that yields advertising and business development benefits. Publishers who deal in real-time bidding or private auctions are exempt from the vCPM.
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.