Youtube CPMs Explained

First of all, what's "CPM"?

CPM stands for Cost Per Mille, or Cost Per Thousand. It's how much an advertiser pays for every 1,000 views of their ad. YouTube takes a portion of all ad revenue for themselves (usually 45%), Paragon also takes a portion of that ad revenue in order to provide our services. The remainder is called the RPM, or Revenue Per Thousand. It's what each channel earns per 1,000 monetized views. For the sake of simplicity, we will be using CPM in this guide.

What can influence a video's CPM?

There are several different factors that can influence the CPM observed on a specific video, here are the main ones:

  • Audience & Retention
  • Content
  • Local Economies
  • Seasonal Trends

Audience & Retention

Advertisers select one or more target audiences when they place an ad on YouTube. Here's an example: If Sony wants to run a campaign to promote the PlayStation 4, they could target Men in the US & Canada, aged 18-25. If your video's demographics fall into this category, your video would be eligible to display PlayStation 4 ads assuming no further targeting was done (see Content).

The demand for specific demographics & types of content is what drives higher ad rates. More competing advertisers means higher CPMs on videos with matching audiences.

Example of CPM variations between countries

Viewership and retention also come into play. Videos with low audience retention rates may experience a serious drop in ad rates. Larger channels can be granted higher CPMs through the  Google Preferred program, allowing advertisers to target their ads to the most popular channels on YouTube.

Content

Let's grab our PlayStation example once again. Sony would want to target their ad campaign to viewers who watch gaming content. Therefore, CPMs on gaming channels can grow during such campaigns, usually during and in the weeks leading up to major gaming events, such as E3. Advertisers can target their campaigns by making sure that their ads only appear on videos related to certain genres or keywords. Tagging is important!

Advertisers are also able to opt out of certain types of content that are identified by YouTube as pertaining to sensitive topics, featuring sexually suggestive content or even profanity & rough language. If you are trying to maximize your ad revenue, avoid these. View the full list here.

Note: While on the topic of content, it's good to remember that longer videos can feature mid-roll ads which have strong CPMs like other video ad formats. Likewise, ultra-short videos may sometimes not feature any video ads at all, leading to much lower video revenue.

Local Economies

The strength of local economies can create noticeable differences between the average CPM for each country, especially based on local consumer purchasing power.

Seasonal Trends

This one may be the most important of all, because it's the one that affects CPMs most. As we mentioned earlier, advertising is all about supply and demand. During the major advertising periods of the year (eg. Holidays, Back to School, ...), CPMs can be up to 4 times higher than average while brands fight to have their advertisements displayed over others.
Unfortunately the flipside of these elevated CPMs is the short periods of weak CPMs following major ad spending seasons, notably in January each year.

Conclusion

Variations in CPMs are normal and should be anticipated. A video's CPM can be affected by several factors - some beyond creators' control. Certain genres of content and audiences consistently yield higher CPMs as they are in higher demand. Creators wishing to chase higher CPMs must focus on these more profitable types of content. Bear in mind that many of these more profitable types of content are niches, leading to lower viewership and therefore less ad views. Finding the right balance is crucial in this case.

Each ad type available on YouTube has a different CPM as some are more valuable than others - such as video ads. The CPM you'll see on your YouTube dashboard is an adverage of your CPMs across all enabled ad formats. The factors discussed in this guide affect all ad formats alike.
It is also important to remember that not all views are monetized on YouTube, despite all ad formats being enabled.

On the MCN side, be weary of MCNs that throw CPMs at you to bring you on board. Your CPM is never MCN-dependent, so unless you have a guarantee in your agreement with them, those figures may be hot air.

You can view your CPMs at any time within the YouTube Analytics Ad Rates section.

Hope this helped! If you have any questions about Paragon, DM us @ParagonNet or view our website: paragon.yt.

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