06 Feb How To Determine A Good CPM In Programmatic Display
We regularly evaluate the price of certain things in our day to day lives. We ask ourselves how much we’re willing to pay for a cup of coffee or dinner out with friends. We focus on cost even more when making more significant financial decisions, such as choosing a price range when shopping for a new car or even when buying a house. However, the broad question of whether or not we consider something to be a reasonable price varies- primarily when determining a “good price” depends so much on the context. It’s no different in the world of programmatic display. Identifying a good CPM relies on several factors.
Before we think about the optimum CPM, let’s think about CPCs in paid search. Your actual CPC depends on the keyword bids of the other auction participants. Likewise, in programmatic display, you can buy impressions in real-time on the auction with RTB, but there are additional deal types available as well: Programmatic Guaranteed and Private Marketplaces.
Pricing mechanics behind programmatic RTB are very similar to the action in paid search. Buyers determine market prices based on their willingness to pay a certain amount for 1,000 impressions.
However, there can be significant discrepancies when it comes to the pricing for any set of impressions, similar to paid search. To set a baseline model for what advertisers can expect to pay, we’ve outlined fair CPMs for a variety of programmatic campaigns.
Note: We focus on a) Banners that were b) bought through RTB using c) Display & Video 360. Display & Video 360 is the only DSP where you can access Google’s robust first-party search data and unique web inventory through Custom list targeting. Display & Video 360’s technology costs are also relatively inexpensive, which translates into some of the lowest CPMs in the industry.
Basic Campaigns: $0.50 to $15 CPM
For a basic RTB and Banner Programmatic campaign, you can buy impressions with CPMs as low as $.50, and as high as $15. Note that the 15x difference between the min and max CPM is a huge jump if you think there’s a “right” CPM range. How can your brand run a campaign at a $.50 CPM? Display & Video 360 gives you access to free brand safety targeting which can cost up to $.25 when purchased through Integral Ad Sciences or DoubleVerify. Google audience data and powerful custom intent list targeting in the platform are available for free, with an additional reach to a third-party inventory outside of Google.
However, note that at $0.50 CPM, you may not win any auctions. If you have a high impression loss (the number of additional impressions matching your line items) you won’t be able to scale the campaign. So how can you avoid a high impression loss?
We recommend creating several Line Items, with CPMs at $1, $2, etc. for an RTB auction. Estimate how many impressions you can win at those CPMs, then look at CTRs, and compare to your ROI. Bid on a CPM that delivers the highest ROI. The CPM is, in some ways, just the means to an end, where the end is the highest ROI possible.
Premium Audiences: $5 CPM or more
When you buy audience data from a 3rd party provider, you will need to pay anywhere from $.50 to $3 CPM – just for the data.
We suggest targeting a $2 CPM for this type of campaign. Given that your media alone can price at a $2-3 CPM (the publisher revenue+ DSP tech costs), a $5 CPM for this type of campaign is a good starting point.
Data-Driven Creative: $7 CPM or more
When you start to serve dynamic creatives or data-driven creatives, you will need to incorporate at least $1 CPM to deliver the creative.
For example, you can partner with vendors who can help you build programmatic creatives. Between the upfront set-up costs and the variable CPM, your effective CPM will be close to $1. You can also license technology from Google e.g., Studio which costs about $0.75 – and that excludes your spend on creative production.
If you are running data-driven creatives, you may need to add another $0.75 to your CPM. This accounts for running algorithms within data science platforms such as Google Cloud. With data-driven creatives and premium audiences in programmatic RTB your overall CPM will be at least $7, but likely more.
Programmatic Guaranteed or Private Marketplaces (PG or PMP): $15 CPM or more
For PG or PMP deals, different rules apply – the majority of the CPM cost gets determined by the publisher and goes to the publisher as well. Since this is not an auction, you can only negotiate CPM with the publisher upfront
Maintain your optimum CPM rate to maximize ROI for a given budget. Even though the CPM is an essential part of your campaign, you shouldn’t base your entire strategy around it. Remember CPM drives you towards your end business goal: Sales Growth.