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5 factors that determine your advertising CPM rates
An interesting post at Techcrunch: Pubmatic Data Suggests Small Sites Command Higher Rates For Remnant Ads Than Large Sites.
I love seeing this cross-site ad monetization data, since it’s rare to get your hands on it unless you work for an ad network. For people outside the ad industry, advertising CPMs seem like black-boxes.
How to guess CPMs – 5 factors
At Revenue Science, a regular game of mine was to eyeball a site and guesstimate the CPMs.
A couple of the factors that I’d use:
- Is the site "sticky" or is it a one-hit wonder (like a reference site)?
- Is the site pretty general, or is it in a particular category (like cars)?
- Who uses the site? Everyone (including international) or just US?
- How dependent is the site on Google SEO versus a community site that draws people back?
- How many pageviews does the site have? Is it a lot? Or is it a small amount
Easy to monetize, hard to monetize
For the people who are curious, this is the easiest to monetize:
One-hit wonder site that exist in a particular category, are based in the US, and have lots of search traffic
In particular, your site is likely to have high CTRs since people are in a "transactional" mode. If you have all of those, and have a ton of pageviews, then you’ll make a ton of money.
The hardest to monetize?
Highly sticky sites that are general (like communication), based 100% outside of the US/Europe/Japan, with lots of pageviews
In a setup like this, not only are people unlikely to want to buy anything, even if they did, there’d be no way to make money off of this group.
Example categories
As a rough rule of thumb, I’d typically guess the following – these are very rough approximations, just to illustrate a couple points:
- Social sites (forums/chat/etc) without direct ad sales teams: <$0.25 CPM
- Largely international sites: <$0.50 CPM
- Medium-sized sites that use banner ad networks: <$1 CPM
- Reference sites in a specific category: >$5 CPM or sometimes much higher, depending on category – we ran into home improvement reference sites that did $20 CPMs
Because we were mostly dealing with so-called "remnant" advertising, these numbers are likely to be at the bottom of the range for these sites. That is, social networks might quote a CPM of $20 CPM, but what they really mean is that 1% of their inventory is sold at that, and the rest of the 99% is sold at <$0.25 prices.
As you can see, as a website property, you fall into either of two categories:
- Horizontal sites used daily which command low CPMs with huge pageviews
- Vertical sites that capture user intent – often used intermittently (with lots of traffic from search) with high CPMs and low pageviews
Horizontal sites, when scaled up to a large enough site, can employ direct ad sales teams that raise the CPM by a significant amount, but the entire process is demand-constrained.
Google is lucky to be both horizontal and vertical – it’s used everyday by people, but also captures user intent.
As stated before, social networks monetize poorly
Of course, sites with lots of pageviews are often ones that are general, are sticky, and have lots of context-less social content. I’ve written up a broader discussion of social network monetization at "5 things that make your social network monetize like crap."
Back to small sites versus large sites
Now, the Techcrunch article discusses the idea that small sites monetize better than large ones. I think that’s actually a correlation rather than a causation. There are a ton of small sites out there, and much of their traffic comes from Google. It’s much harder to build a functioning social site where people coming back daily than a site where people occassionally stumble on it through their search engine.
As a result, my guess is that the mindset of the typical user includes intent – and that makes all the diference.
definitely out-analyzed t.c. on this one
mathew
7 Apr 08 at 2:34 pm
Nice post. Much better than tc’s thats forsure.
I’m glad to see someone has the smarts to actually mention fill rate. Along with the myth of singe-double digit CPM rates, there is also a myth that sites have a 100% fill rate which is totally untrue.
Of course I understand why Arrington won’t mention this on his own site, since it goes against pumping and hyping startups. But he knows its true. He’s even said publically that he’s unsatisfied with Federated Media due to the fact that they can’t fill inventory for his site. Don’t really know why he is complaining when he prints money from 125×125 squares.
No BS
7 Apr 08 at 3:00 pm
Interesting article, especially to me since I am in the process of developing a site that involves “home improvement”. Thanks.
Workpost.com
7 Apr 08 at 4:40 pm
Nice post. I think it could be also mentioned, that SEO approach for transient traffic from search engines can also have a big impact. By targeting realsonable volume terms that indicate a user is immediatly looking to purchase, above $20 CPM can be achieved.
Brett
7 Apr 08 at 5:04 pm
Andrew,
It’s great to see someone actually break out realistic CPMs. I can’t tell you how many entrepreneurs I’ve met who quote $20 CPMs in their business plans. A sure sign they’ve unfamiliar with online advertising.
Chris Yeh
7 Apr 08 at 10:15 pm
great post ..
how about discovery cost (from advertiser perspective) of small sites in high-value niches? Do advertisers really bother buying small lots of inventory? At what volume can a site start expecting advertiser interest on a network like Rev.Sci/RightMedia?
Joy
7 Apr 08 at 11:25 pm
Very useful analysis. I wonder where my site apnijobs.com will fall in?
Kashif
8 Apr 08 at 1:17 am
Great post. Extremely helpful. Since this goes straight to the heart of many websites’ plans, it’s baffling that more people don’t discuss these issues forthrightly and factually.
Gabe
10 Apr 08 at 12:03 pm
I am making my own website now and I thought that the best way to popularize it is with some search engine.But now I will search for some other methods to increase the traffic to my website.
Steven Davies
12 Apr 08 at 1:21 am
Thank you for the post – does anyone have figures for Europe/Germany?
Andreas
29 Apr 08 at 3:25 am
Useful article especially with benchmark figures. I have a question though – are these CPM figures ‘overall’ figures for a page, or are they per advertisement? I presume the former, but just checking.
Owen Jones
2 May 08 at 10:28 pm
Andrew, great post. Although I had a question regarding your first point. You list “stickiness” vs. one-hit wonder. I was wondering if they are opposite ends of spectrum/mutually exclusive. Some examples would be great! Thanks,
Evan
7 Jul 08 at 7:41 pm
[...] users suck at monetization As I’ve discussed many times on this blog, international users are extremely hard to monetize, unless you’re Japan/UK/western [...]
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26 Aug 08 at 8:37 am
nice post
very informative and useful.
euvgov
7 Sep 08 at 11:43 am
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21 Oct 08 at 4:11 am
Great post…I working on a niche web start-up and it's mind boggling how difficult it is to flesh out real world CPM's.
Steve
11 Jun 09 at 4:41 pm
[...] 5 factors that determine your advertising CPM rates [...]
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19 Aug 09 at 1:56 pm
very nice post and usefull information
Jean-François PIERI
17 Sep 09 at 2:27 am
How much CPM a techincal website can get? like Web developement /programming articles site with 20K pageviews monthly..
Double Din Navigation
5 Jan 10 at 1:51 am
Awesome post, you're making me wonder which category my website [url=http://www.magictrickscentral.com]magic tricks revealed[/url] falls into.. I know I've been getting OK pageviews but the conversion sux.
earth4energy
4 Mar 10 at 11:58 pm
Your tips are very accurate, but they require a well trained eye. I wanted to calculate the CPM rate for easy saver complaints and I got lost somewhere in the middle of your list, and I found it much easier to use a free CPM rate calculator like the one from seochat.
coco1212
28 Jun 10 at 10:06 pm
I think that social networks will become soon easy to monetize.More open-minded consumers actively seeking advice and recommendations from online peer groups, creates a gold mine for advertisers who can be armed and ready with real brand messages from real people.
Mark @ http://www.blairrewards.com
msaiwn
29 Jun 10 at 6:35 am
I think that social networks will become soon easy to monetize.More open-minded consumers actively seeking advice and recommendations from online peer groups, creates a gold mine for advertisers who can be armed and ready with real brand messages from real people.
Mark @ http://www.blairrewards.com
msaiwn
29 Jun 10 at 6:36 am