As an online publisher, you probably hear about RPM all the time, along with ALL the other three-letter acronyms that relate to digital publishing, from SEO to CTR to CPM.
Today, we’ll take a closer look at CPM and how it comes into play for your ad earnings.
What does CPM mean?
CPM stands for “cost per mille” and measures how much an ad costs per one thousand impressions.
For advertisers, CPM is the dollar amount they’d have to spend to purchase 1,000 ad impressions on your site. For publishers, CPM is the dollar amount you make for every 1,000 ad impressions from your site.
If you want to get really technical, according to Google Ad Manager…
“Ad Manager counts an impression each time a creative is downloaded in the user’s device and has begun to load. Note that the impression is counted before the creative is fully downloaded and viewed by the end user.”
Every time a page loads on your site, a programmatic ad auction takes place, where advertisers bid for ad space on your site. Your CPM is the average of the winners of all the millions of auctions that take place for your ads.
What’s the difference between CPM and CPC?
CPC, or “cost per click”, is another way advertisers pay for online advertising. With CPC, a site visitor has to click on an ad in order for the advertiser to pay and for the publisher to earn revenue.
With CPM, you get paid for every ad that shows.
How CPM affects publishers’ ad revenue
On the publisher side, CPM is an essential factor of what makes up RPM (earnings per one thousand pageviews) and your ad revenue.
The amount advertisers are willing to pay for ads on your site (CPM) multiplied by how often these ads are getting seen (total number of impressions per pageview) equals your RPM.
RPM = CPM × ad impressions per pageview
Publishers, or ad management companies like AdThrive, have the task of optimizing the ad auction and ad layout to maximize revenue.
One common method for optimizing the ad auction is by setting a minimum CPM rate that you will accept for your ads, known as a “floor”. CPM floors can encourage higher bids, but can also limit advertiser participation in the auction.
Maneuvering CPM flooring and fill rate is both a science and an art, but at AdThrive, that’s not something you have to worry about!
Behind the scenes, we are constantly optimizing our header bidding system (the ad auction) by adding advertisers and ad networks to increase competition, removing underperformers, adjusting CPM floors, and perfecting our ad code technology to make sure your CPMs are fully optimized to bring you the highest ad revenue.
Likewise, we are constantly optimizing your ad layout. Our team of experts pours over the data across our network of publishers and your specific site to provide customized opportunities to put more ad money in your pocket.
CPM and fill rate
CPMs are only part of the equation for publishers’ ad revenue. Fill rate is CPM’s crucial partner in generating top ad earnings.
Fill rate is how often an ad impression is actually available for an ad slot. It takes strong CPMs and a good fill rate to equal high revenue.
Accepting only high CPM ads by setting a high floor rate can actually mean you earn less overall.
For example, a $2 CPM that’s only available 40% of the time will earn you less overall than a $1 CPM that’s available 100% of the time!
This is one of the things we’re constantly monitoring and adjusting behind the scenes — structuring our auction for the highest possible fill rate and making sure that each ad impression pays the most it can.
What is eCPM?
You may have come across the metric eCPM, which is a little different from CPM. eCPM stands for “effective cost per mille” and brings fill rate, floors, and other factors into the equation.
eCPM = fill rate * CPM
The eCPM formula is very similar to the RPM equation: eCPM helps you understand the value of your average ad impression; RPM helps you understand the value of your average pageview. They are just slightly different ways to measure how ads are performing.
Since we take care of everything related to fill rates, CPM floors, and ad management, AdThrive publishers don’t have to worry about eCPM. You’ll find RPM (especially page-level RPM) a more effective way to gauge your ad performance!
What determines CPM rates?
There are many different factors that can cause CPM to be higher or lower. Since CPM is part of the RPM equation, these are some of the same factors that can cause a variance in RPM.
1. Ad viewability and layout
Understandably, advertisers want to know their product or brand is being seen by visitors to your site, so they are willing to pay more for certain ad viewability thresholds or certain types of ads that are more viewable.
Advertisers may also look at the total number of ad spaces on the page to understand how their message will stand out. In addition to providing a poor user experience, too many ads can turn away potential advertisers who don’t want to compete with so many other ads on the page. This is especially important when it comes to high-paying premium deals!
The ad layouts we run at AdThrive are custom-designed for each site with viewability, user experience, and advertiser preferences in mind.
2. Traffic and user information
Advertisers want to pay for ads that reach their target customer, so more information about the user visiting your website can mean more advertiser spending.
For example, a reader using the Chrome browser, which still employs third-party cookies, will be more valuable to advertisers than a reader using the Safari browser, which has much less information about users. This may change in the future as Chrome plans to stop using third-party cookies in 2022, but new, privacy-conscious ways to understand your readership are being developed to help inform advertiser spending.
Advertisers also tend to favor users from regions like the United States and Europe, and may even have specific metropolitan areas they’re willing to spend more to reach.
As a publisher, you don’t have much control over where your readers live and what device or browser they are using — but it’s helpful to understand how this contributes to your ad earnings when you’re examining your data and marketing strategies.
3. Seasonal trends
Advertiser spending goes through a fairly reliable pattern throughout the year, as advertisers reset their budgets at the beginning of the year, quarter, month, and even week. This causes pretty reliable trends in CPM, and therefore RPM, throughout the year.
Assuming there are no unusual factors at play, internet ads earn less on February 1st than on December 20th — advertisers are conserving their budgets at the beginning of the year while in the fourth quarter they are spending the rest of their allocated ad dollars and taking advantage of the holiday shopping season.
Some advertisers follow a different fiscal year, resetting their budgets in July. This, along with the fact that more people are outside and spend less time behind their computers in the summer, causes a mid-year dip in advertiser spending.
Knowing these patterns can help you be aware of how your ad earnings may vary throughout the year and to be prepared financially.
With the sunsetting of third-party cookies, contextual advertising will become more popular. Despite the focus on individual website visitors over the last decade, matching ads to the content on the page makes a lot of sense. Readers are in the mindset of the topic they are reading about and therefore may be more interested in a related product.
Advertisers selling a similar niche product or service know they will reach their target audience when they display ads on certain sites, and they may be willing to pay a higher CPM for those ad placements.
Brand safety is another thing to consider. Some advertisers may not bid on content that could be considered controversial or damaging to their brand’s reputation, such as posts that mention drugs, alcohol, or violence. With fewer advertisers bidding on those posts, they garner a lower CPM compared to posts with more advertiser competition.
Assessing your CPM
You can use these factors to help diagnose low-performing pages, using page-level reporting like AdThrive’s industry-leading RPM by Page dashboard.
If you’re seeing a lower-than-average CPM on a certain page or during a certain time period, ask these questions:
- What time of the year or month is it? CPMs are generally higher at the end of the month, quarter, and year.
- Where is the traffic coming from? Are readers coming from desktop or mobile? What browser are they using? In what country are they located?
- Would advertisers consider my content to be brand-safe? Am I using any sensitive phrases, even unintentionally?
- Am I running a fully optimized ad layout on this page? Are highly-viewable ads enabled? Am I running a monetized video player?
For more on CPM, RPM, and a great overview of how to use the RPM by Page report, check out our RPM by Page training!
AdThrive publishers are set up for CPM success
At AdThrive, we combine a well-optimized programmatic system, exclusive direct deals with advertisers, and high-performing ad layouts — pairing healthy CPMs with high fill rates — to help our publishers receive the most money for every pageview.
Looking for an ad management company to help optimize digital advertising on your site? Contact us today to find out more about partnering with AdThrive!