Page CPM: Be Aware of Fake eCPM

The material is primarily aimed at web publishers who use display advertising to monetize their content.

Every publisher aims to place as few ad placements as possible while earning the highest revenue from each one. On the one hand, banner ads shouldn’t repel visitors to the point where they close your site and never return. On the other hand, as a publisher, you need revenue to continue creating content and developing your product, and for this, you need as many ad placements as possible. It’s a vicious cycle.

The solution to this issue is achieving a high CPM and fill rate on each of your limited ad placements. Unfortunately, nowadays, achieving a combination of high CPM and fill rate is only possible if your website is well-known to advertisers. Advertisers see your domain on the list of potential ad placements, understand that other advertisers are also familiar with your project, and therefore raise the CPM and the desired number of impressions (or the advertising budget) to prevent competitors from placing their ads on your niche site. But even in this case, factors that can lower the fill rate exist, one of which is audience targeting based on behavior targeting, third-party cookies, and more.

So what should publishers who are just starting out or are known to a limited number of advertisers do? They have to choose between building their strategy on high CPM but having "gaps" on the site (instances when ads don’t display due to floor CPM cutoffs) OR removing the floor CPM, achieving over 90% fill rate, but seeing their extremely low CPM daily and getting frustrated.

At this point, tricky companies come to the "rescue," guaranteeing high CPM and fill rate. But does this mean high revenue? We, WMG International, also known as adWMG in the UK, often encounter cases where publishers come to us saying, "We connected with a new monetization agency, they provide higher CPM and fill rate than the previous ones, but somehow the revenue is lower." Let's explore why this happens.

First and foremost, as a publisher, you must understand that the main marker of effective collaboration with a monetization partner is the final revenue, not CPM or fill rate. Let's look at the CPM formula below:

CPM = CPC*CTR*1000

As we see, CPM depends on CPC and CTR. CPC primarily depends on your site's theme. CTR depends on the position of the banner, whether it’s visible to users, not covered by other site elements, or next to another banner that can take away clicks.

• CPM - how much advertisers pay per 1000 impressions
• eCPM - how much publishers earn per 1000 impressions
• RPM - Ad request revenue per 1000 impressions

QUOTE:

“There is a subconscious perception that placing two banners, for example, two 300x300 banners stacked on top of each other, will bring more profit than one 300x600 banner. But this is not the case. Our company has conducted many such experiments, and one 300x600 banner always brought more revenue than two 300x300 banners side by side. This happens because two banners side by side create inconvenience for the user, and the total number of clicks on them will always be lower than if there was one large 300x600 banner. Users do not click on two banners simultaneously. When a user has to choose between clicking on the first or the second, they end up not clicking at all and scrolling past. And as we know, fewer clicks -> lower CTR -> lower CPM -> lower revenue.”

- Kovalenko Maksym, CEO WMG International.

These tricky companies tell you to remove all your ads and install only their banners. Here's what happens next, using an example.

Suppose you had three banners on your page: in the article, in the sidebar, and below the article. The tricky company installs its three banners. Let’s assume,

• Banner 1, CPM = $1
• Banner 2, CPM = $1.2
• Banner 3, CPM = $0.8

Then the trick occurs the total CPM of the three banners = $3. Since you removed all your other ads and only the tricky company’s ads are on your page, the page CPM they provide is $3. This page CPM will be shown in the reports to you as CPM. But remember that CPM is the price per 1000 impressions. In this case, the number of impressions is also summed across the three banners, with 333 impressions per banner (with 1 bonus impression).

Next, let’s imagine 1000 visitors coming to your page. Since the tricky company calculates page CPM, it will show you a $3 CPM.

But if you continued calculating CPM for each banner separately, then 1000 visitors * 3 banners = 3000 ad impressions, and the average CPM = $3 / 3 = $1.

In the first case, you see CPM 3 times higher, but impressions are three times lower. In the second case, it’s the opposite. The revenue remains the same, BUT you need to pay the tricky company a commission (revshare). Usually, this is 10% to 20%.

So, in this example, average CPM $1 = page CPM $3. Congratulations, from a revenue standpoint, you’ve gained nothing; now, your eyes are pleased with a higher CPM, but remember that you paid a revshare commission, resulting in lower final revenue.

Summary:

Always calculate the CPM of each banner separately. Do not make the mistake of considering Page CPM for all banners together; remember that Page CPM is Fake CPM.        

If you have any questions, our team will be happy to provide answers.

Sincerely, WMG International (adWMG) team.

Read more: adwmg.com