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Saturday 12 August 2017

How Display Ad CPM Rates are measured

Introduction

Display ads are a primary source of revenue for many websites, including both very large and very small properties. Because it’s so easy to activate, this revenue stream is one of the most popular options for smaller sites looking to gain traction. And because it’s so easy to scale, it’s used widely by sites with millions of monthly unique visitors as well. This page presents data on the average CPMs that can be expected from running display ads on a site. For reasons we will discuss below, determining the average CPM (or RPM) for display ads is incredibly challenging. Performance depends on a number of different factors, including the niche of the site and the specifics of the ad units employed. Despite these challenges, we’ve scoured the Web for reliable sources for benchmark figures on display ad CPMs. These sources, which were used to compile the data in the above table, are highlighted in detail below.

RPM vs. CPM

The distinction is pretty straightforward: CPM refers to the cost of purchasing 1,000 ad impressions, while RPM refers to the revenue generated from serving 1,000 ad units (or from serving 1,000 pages–more on this distinction below). In many cases, these metrics will be almost identical; what the advertiser pays is what the publisher gets. But in many instances, there’s a very large discrepancy between the two for a number of reasons. The largest (and most obvious) is networks. For publishers who don’t sell their ads directly but instead use a third party such as Google AdSense to monetize, the fee paid by the advertiser (CPM) gets split into two parts: publisher revenue (RPM) and the network fee.

Display Ads 101

Determining an average CPM for display ads is challenging in part because of the large number of terms that fall under this term. “Display advertising” is a very broad umbrella, covering a number of different types, sizes, and styles of online advertisements.
  • Different Types. There are very different types of display ads. Many averages include text ads, which tend to cost less than traditional banner ads. There are also different types of image-based ads, including rich media ads and ads that show video.
  • Different Sizes. Even among the “traditional” banner display ads, there are a number of options. For example, the CPM earned for a 300×250 rectangle may be different than the CPM earned by a 728×90 leaderboard.
  • Different Locations. The position of an ad on the page will have a major impact on CPM, and make it difficult to determine an average. For example, a 300×250 ad placed above the fold will have a much higher CPM than an identical ad placed near the bottom of a page.
  • Different Audiences. Most Internet traffic is relatively worthless; if your site has an extremely broad audience, it will be tough for networks to serve up relevant advertisements, which results in low click rates and low CPMs. But if you have a valuable, targeted audience–for example, if your site has a high concentration of new mothers–it becomes possible for advertisers to serve much more targeted and effective messaging.
It’s also important to distinguish between ad unit RPM and page RPM. The relationship is very simple: the RPM for a page is simply the sum of the RPMs for the individual ads on that page. But confusing the two can lead to a major misunderstanding of the revenue opportunity. If an average ad unit RPM is $2.00, a Web page that incorporates three ad units would have an overall RPM of $6.00. The law of diminishing returns obviously comes in to play here; the average RPM for an ad unit can’t stay constant as more and more units are added to a page.

Source #1: Quarterly Turn Report

In a data-filled quarterly report, Turn indicated an average CPM of  $1.28 for display ads, up from $1.22 in the second quarter of the year. It is interesting to note that CPMs tend to be concentrated towards the lower end of the range; more than half of ads have CPMs of less than $0.80 and close to 20% fetch less than $0.10:Turn ReportThe CPMs referenced here reflect the cost paid by advertisers to run a single ad unit. In other words, these figures do not take into account any cut taken by networks.

Source #2: Forrester Report

In its annual Digital Media Buying forecast for 2012, Forrester compiled survey results from more than 200 professionals to conclude that CPMs would rise from $2.66 in 2012 to $4.68 by 2017. This figure includes text ads, as well as banners, rich media, and video. Although this eCPM estimate is a bit dated and includes various types of media, we did include it in our estimate.

Source #3: Hochman Consultants

This piece of data comes from Hochman Consultants, a search and Internet marketing firm that helps clients buy media online. They’ve aggregated data from about 50 clients for the past nine years. Though it’s a small sample size, it’s very interesting and valuable data:
Average PPC Costs
The most relevant piece of data here is the average CPM; this reflects what the clients paid during the year. While a group of 50 or so advertisers is relatively small, over the course of a full year even modest budgets would buy hundreds of millions of ad impressions. There are a few items to note:
  • This data includes both ads placed in search results and those placed on the Google Content Network (i.e., on publisher sites). The cost of ads on search results page can vary significantly, and can be very high for certain valuable keywords.
  • This data reflects the CPM paid by the advertisers. AdSense takes a 32% cut for ads served through AdSense, meaning that this translates into about $3.20 for the publishers of the sites where these ads appeared.

Source #4: BuySellAds

BuySellAds is a marketplace where advertisers and publishers can come together to create display ad campaigns. Publishers can list their inventory on this site, creating a centralized location for advertisers to browse available inventory. In order to come up with an estimate of an average rate, we examined the “top performing” ad units on the site, including those that were sold out. We compiled a list of ad units that were both:
  • An IAB standard unit (i.e., 728×90, 300×250, 160×600, or 300×600); and
  • Positioned above the fold.
We reviewed the 50 highest rated ad units that met these criteria and came up with the following metrics:
  • Low: $0.30
  • Average: $2.58
  • Median: $2.00
  • High: $10.00
These figures represent single ad unit RPMs; they do not take into account the cut taken by the marketplace in exchange for their services. In other words, the net amount earned by the publishers will be quite a bit lower. It’s also worth noting that the huge range present in CPMs exists here as well; even among the very top performers on this site, the highest CPM was more than 30x the lowest. A partial list of ad options considered is presented below:

Methodology

Since the sources above do not use a consistent methodology, date range, or system, please note that the MonetizePros aggregated values are calculated via an inexact science. I.e., there is some napkin math here; we do however make an effort to be as transparent as possible, and thus our methodology notes are listed below.
  • We considered all of the sources above in our estimation of an average CPM. Though there are limitations to each of these data points, there is a scarcity of accurate data related to average display ad RPMs.
  • We calculated the CPM referenced above ($2.80) as a simple average of the data points collected here.
  • This figure reflects the CPMs paid by advertisers for 1,000 ad impressions. The RPM realized by many publishers will be lower after considering the cut taken by ad networks.
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