Understanding CPM for Publishers

Both publishers and advertisers live and die by CPM. CPMs Dictate the cost for the advertiser and the revenue for the publisher and every slight shift in it makes a world of difference.

What is CPM?

CPM stands for cost per mille, mille being Latin for one thousand. Practically speaking it refers to the price per 1000 ad impressions.

Publishers and Advertisers approach CPM from opposite directions.

Advertisers seek lower CPMs. Publishers seek higher CPMs.

Each one is trying to maximize their revenue or impact and will take different actions to achieve their goals.

Most CPM calculators are geared for advertisers concerned with their spend. Publishers just get a number on top of Google Ad Manager listing the CPM, but what is that number based on?

This article’s focus is for publishers seeking to understand what CPM is, what factors affect it and what they can do to increase it.

How CPMs work for individual impressions

When an ad is called starting the RTB (real-time bidding) process, each bidder places a bid, whatever bid wins, that amount is divided by 1000 and that is the amount the publisher receives (minus ad partner fees.)

So, when a publisher views their CPM, they are viewing the average rate they receive for 1000 ad impressions. The actual rate of the individual ad can vary, and in some instances, significantly.

A publisher’s CPM is based on several factors, some are within the publisher’s control others, are not.

Who decides what CPM to bid and why?

When agencies are bidding on an impression they are looking primarily at the user, not at the site. They are looking to see if the users are in their target market. The more points the user meets on the target audience criteria the higher an advertiser will bid on them. These criteria are input into the DSP when the advertiser/agency sets up the campaign.

The implication for publishers is to attract users in coveted and marketable users. Every industry has a different target audience. While one user can be part of two audiences, they may act differently when interacting with different content. Therefore, while the user may be the same, the CPM for acquiring him will fluctuate.

For example. John is a 30-year-old male who lives in New York City, he loves his Golden Retriever and the Jets (poor him). He uses his phone to view sites that cater to dog owners, as well as sports fan sites.

When a SSP identifies him as part of the Millennial cohort, male, who lives in a major metro city, using a mobile device, it’ll send the information to the DSP that will in turn find campaigns with those targets. The DSP will also consider what else it knows from the SSP, general industry knowledge and other third-party data that it knows about the site and users behaviors on the site. The DSP will also consider the site itself and how previous users have interacted with it.

In John’s case, focusing on industry research the DSP will consider the following for each vertical:

Slicing and dicing this information to figure out how much John is worth bidding on when he’s browsing sports sites versus pet sites is where that algorithm does its magic. Consequently, comparing CPMs across industries is unhelpful. What is decent in one, might be low for another.

Publishers are not likely to take up an entirely different subject matter just to chase higher CPMs, so this is a factor that publishers cannot influence.

Factors that affect CPM Publishers have no control over

Other factors publishers can’t change but that affect their CPM are Geography, Device, and Seasonality.

Geography

More developed countries like the US and Western Europe command higher CPMs than countries in Africa or Southern America.\

Device

Ad impressions on desktops command a higher CPM than those on mobile.

Seasonality

Different times of the year, like the Holiday season, agencies and brands advertise more raising CPMs. Once the Holidays are over it’s the end of the quarter budgets have been spent, lowering CPMs.

Before you despair, there are some ways that publishers can influence CPMs.

How publishers can influence CPM

Content Quality

Your mother was right, quality pays. Sites with quality content will command higher CPMs because they are perceived as more authoritative and trustworthy by both users and advertisers.

Content Niche

Super niche sites have super niche audiences which makes targeting more straight forward for advertisers. In turn advertisers are willing to pay more for an ad impression.

Ad Format

Not all ads are created equal. Different ad formats command different CPMs based on size and functionality. Video ads have the highest CPMs. Display banners have the lowest. You can read all about ad formats here.

Ad Viewability

If a tree falls in the forest but no one hears it, does it make a sound? Likewise, if an ad is placed but no one sees it, does it count? Advertisers pay close attention to viewability. There are ways for publishers to increase their ad viewability, you can read all about it here.

Number of ads on page

It’s a little counterintuitive but often the more ads, the lower your CPM will be. Advertisers view space as less valuable if there are other ads running alongside theirs. However, running more ads at a lower CPM may be worth it for a publisher. It’s an individual decision that should be made through careful testing and consideration.

Price Floors

Putting in a price floor indicates self-value to DSPs. If advertisers can acquire your inventory at a lower price, it will bid that price. A price floor indicates value to the DSP and if it considers the inventory valuable it will raise its CPM in future bids.

Next Millenniums Approach to CPM

Considering all the criteria mentioned, it’s not easy for publishers to optimize their site by themselves. That’s where Next Millenniums account managers work their magic. Account managers work with you to optimize your site, deciding on which ad formats, how many, and where to place them. They also review your site quarterly, ensuring that it’s fully optimized. Next Millennium also offers unique high impact ad units to make your site more attractive to advertisers.

Wrap Up

Impacting CPM may seem elusive to publishers. There are many factors beyond their control that affect their CPMs. There are other factors though within publishers’ control that can positively change their CPMs. Publishers should focus on what is in their locus of control and optimize their sites accordingly.