CPM (as well as target CPM) is one of the pricing methods commonly used in digital advertising platforms, along with CPC (cost per click) or CPA (cost per acquisition). Both advertisers and publishers extensively use the term.
To avoid the rabbit hole, we’d like to reserve this article for the following people:
- YouTube advertisers using Google Ads.
- Publishers who want to improve their ad fill rate by using tCPM in Google Ad Manager.
First, let us define CPM to better understand target CPM (tCPM).
What is CPM?
CPM stands for cost per mille or cost per thousand impressions. It indicates the price advertisers pay per 1,000 impressions on a webpage or platform. For instance, a CPM of $2.5 will tell us that an advertiser shall pay $2.5 for every 1,000 impressions of an ad.
What is a target CPM (tCPM)?
Target CPM is a method of setting a bid on how much, on average, an advertiser is willing to pay for every thousand times an ad is shown. That amount is the target CPM (tCPM).
Target CPM is a bidding strategy that made its way out of Google Ad Manager during the beta release in December 2018.
Who is tCPM for?
tCPM is for advertisers who wish to do video campaigns in Google Ads. It is also for publishers who want to increase their ad fill rate using tCPM in Google Ads Manager.
Google Ads YouTube advertisers
First, it is crucial to differentiate between a view and an impression for YouTube ads.
Regardless of format, anyone who sees the ad will count as an impression. Only those who view it are engaging with your ad. Think of it as a click on a search ad that counts as engagement.
There is much to talk about monitoring and improving YouTube metrics, but that is for another day.
Now back to tCPM and how we can use it on YouTube ads.
Target CPM for YouTube ads
YouTube Ads bidding is based on the format you choose. Each format has its own bidding requirements:
- Target CPM is used for non-skippable in-stream ads. The target price is set per thousand impressions.
- Viewable CPM is for outstream ads, and the target price is set per thousand viewable impressions.
- Maximum CPV sets the maximum price you’re willing to pay per view. This allows Google Ads to deliver as many conversions as possible within a budget.
- Target CPA sets the target price per conversion.
tCPM helps you gain as much unique reach as possible. Note that some impressions may cost more or less than the target CPM. Altogether Google Ads aims to keep the campaign’s average CPM equal to or lower than the target CPM set.
How do I set my Target CPM in Google Ads (for YouTube)?
- Log in to your Google Ads account.
- Create a new campaign.
- Click Create a campaign without a goal’s guidance.
- Select Video and click Continue.
- Select Non-skippable in-stream.
- You should see Target CPM as the default bid strategy. (This is how to use target CPM in Google Ads for YouTube. We will set the budget later in the instruction.)
- Under budget type, select either Daily or Campaign total.
- Select Campaign total when you have a budget for the entire video campaign. Select Daily if you are sure of the average daily amount you want to spend for each ad campaign. Select Campaign total if undecided. This way, you easily know how much money you will spend for the entire campaign.
- I strongly recommend you use the Related video feature. You can add up to 5 videos you have. I can’t tell you how much savings you’ll get from this feature. The more relevant the videos are to your video ad, the better.
- Under Languages, make sure to use the language of your target audience.
- Under Create your ad group, fill out the following:
- Ad group name
- Under People, find the appropriate Demographics and Audience segments of your target audience. To start with, if you are unsure and do not have past data to be used as benchmarks, don’t go too narrow or too broad. Choosing the gender or age might be enough. Nevertheless, you can always skip these, including Audience segments. You can tweak these as you move forward based on your Google Ads reports or metrics.
- Under Content, again, don’t go too broad or too narrow unless you are sure of what you are doing. You may choose a topic, a keyword, or a placement. You may tweak these items as you move forward. The simple rule: know your general audience, and start with that.
- Under Create your video ads, input the YouTube URL to be used as an ad.
- Fill out the Final URL and Display URL, which should be pretty straightforward. (The video I uploaded for the test is about a minute long. You should choose a video that is about 7-15 seconds long.)
- Set your Target CPM bid.
Target CPM bid for YouTube Ads
The target CPM will depend on several factors, and let me pose a few items:
- What is your advertising appetite?
- What is your goal?
- What is the location of your target audience? Some locations are more expensive, like the United States, United Kingdom, and Australia, compared to India and the Philippines.
A reasonable estimate for an average cost per view that you can start with is $0.05/view. Adjust when you get some data and results to evaluate.
How do you calculate CPM?
CPM = 1000 × cost / impressions
For Google Ad Manager publishers
What is Google Ad Manager?
Google Ad Manager (GAM) is an ad exchange platform introduced on June 27, 2018, to combine the features of two former services: DoubleClick for Publishers (DFP) and DoubleClick Ad Exchange (AdX). (These would sound familiar if you have been in the Internet arena for some time.)
Google Ad Manager is a free version for small businesses. The paid version is Google Ad Manager 360. It is well-suited for publishers with more complex advertising setups, a high volume of ad impressions, and a need for advanced reporting and campaign management.
Now, I don’t want to confuse you, but since Google has many products that may seem to overlap at first glance, let me explain further.
Google Ads versus Google Ad Manager
Suppose you have multiple accounts on your Google Ads account. In that case, you are probably using a Google Ads manager account, which is entirely different from Google Ad Manager.
Simply put — publishers are probably interested in Google Ad Manager. On the other hand, advertisers are likely more interested in Google Ads.
Yes, advertisers for Google Ads; and publishers for Google Ads Manager. What about Adsense, you may ask?
Adsense versus Google Ad Manager
Google Ad Manager and AdSense are Google products that help publishers sell ads. Each provides features suited to different publishers.
AdSense acts as an ad network, providing access to demand from advertisers and helping publishers set up ad inventory. It is the best ad solution for publishers with a small ad management team who want more automation.
Google Ad Manager is for large publishers with significant direct sales. It provides granular controls and supports multiple ad exchanges and networks, including AdSense.
Now that we have cleared that up, hopefully.
Why use a target CPM?
The following statements assume you are a publisher:
Target CPM allows publishers to adjust floor prices dynamically to maximize yield. Implementing tCPM saves the publishers from constantly monitoring and updating the floor price. tCPM is an alternative way of setting a floor price that allows for increased fill rate and yield while maintaining an average minimum price for your inventory. tCPM is a way publishers can leverage Google’s machine learning expertise.
Increase the ad fill rate
Though the tCPM feature is optional and one of the ways to set the floor price on your inventory, implementing it can increase your fill rate. (An ad fill rate is the percentage of ad requests received on the ad display.)
You, as a publisher, must also understand that Target CPM is first to improve the ad fill rate before the ad revenue.
Kindly understand that ad revenue depends on many factors. This includes geography, placement, ad sizes, your niche, and the overall performance of your ad inventory.
Note: Test before fully implementing a tCPM.
According to Google Ad Manager, there are some cases when Google Ad Manager can’t match the tCPM. This happens when:
- The rule is new or lacks data for full optimization.
- There is a significant fluctuation of traffic in the inventory.
Manual versus target CPM
With manual CPM, a price is set for a bid to win. Anything below that price, an ad won’t be accepted. When target CPM is enabled, Google can accept the offer to maximize the publisher’s yield and optimize the advertiser’s bid.
VERY IMPORTANT: Monitor the performance regularly, whether with manual CPM or target CPM.
Update the CPM frequently
Google Ad Manager uses your predicted value CPM rates to select the highest bidder. When your value CPMs are outdated, your networks could compete with incorrect rates, preventing you from maximizing ad revenue.
You could increase your revenue by updating your value CPM rates at least once monthly.
To review and change your target CPM in Google Ad Manager, do the following:
- Log in to your Google Ad Manager > Delivery > Orders.
- Then click an existing line item.
3. Click the amount under CPM, then click Save after.
To set up your Google Ad Manager, here is a step-by-step guide from Google.
Whether you are an advertiser or a publisher, target CPM is a valuable tool you can use. Consider this as part of your marketing or advertising arsenal – not the only tool.
It is always good to have different options when doing advertising or marketing. For a niche, CPM might be a good choice to start with, as it is scalable.
A common notion of why you may not use a CPM approach is that you may pay for 1,000 impressions but receive no clicks. This is a very valid reason.
However, if you are into display networks and want to evaluate the price of the placements solely, CPM is a good choice, as CPC bids are based on click-through rate (CTR), quality score, and other factors. After shortlisting your list of placements, you can consider creating a different campaign to check the CTR. I know it is a bit painstaking, but it might be worth the experiment to reap more from your budget moving forward.
Just remember to monitor your campaigns regularly. Monitor, evaluate, and tweak. A stale campaign is a dead campaign.
And oh, if you’re yet thinking of handing over the task to someone else, kindly read this: Freelancer Vs. Agency.