Google introduced the Target CPM feature to dynamically expand the possibilities for managing floor prices. The assumption of Target CPM is a better and more lucrative adjustment of floor price rates to bids, combined with inventory value protection by ensuring that the CPM does not fall below the Publisher’s specified value.
1. Why target CPM (tCPM)?
Whereas in the standard auction model, the Buyer cannot win the auction by bidding below the “hard floor,” after activating Target CPM, Google can both increase and decrease the price rate for selected auctions in order to achieve the desired level of CPM while allowing some impressions to be sold cheaper, thereby increasing fill rate and revenue.
2. CPM Influencing Factors
CPM value can be influenced by a number of factors.
Geography: The average CPM will be influenced by the level of development of the online industry in a given country, as well as the purchasing power of the country’s residents. CPMs in the United States, Europe, Australia, and Japan will be higher on average than in Egypt or Brazil.
Data usage: Targeted ads that use available data to build a user profile command higher CPM prices than simply purchasing ad space without segmenting the target audience.
Device: Ads served on mobile devices have a lower CPM than ads served on desktops due to screen size limitations, a lower CTR, and a lower conversion rate.
Website topic and quality: Because they have a more segmented and homogeneous audience than a generic news site, niche publishers can charge a higher CPM.
Ad size: Larger ad formats have a higher CPM on average because they are more visible and likely to entice user action. However, the most common ad sizes, while not the largest, generate higher CPMs.
Ad viewability: Viewability varies by ad format, but for display ads, Google, IAB, and MRC define viewability as having at least 50% of the ad on screen for at least 1 second. A publisher’s CPM rates will plummet if their viewability score is low.
Past performance: Advertisers place a high value on traffic quality and are willing to pay higher CPMs for placement in sites that drive conversions and a higher ROI (return on investment).
The number of ad units on the page: A higher number of ad units on the page lowers the CPM rates. Lower bids for those ad units will result from increased supply.
Seasonality: Different industries’ traffic has some seasonality, which causes changes in CPM rates. Summer can see a drop in spending, especially in Europe, as many people take time off work for vacation.
3. How soon after activation does Target CPM have an effect on performance?
While influenced by a variety of factors, retargeting CPM may be appropriate for you. So the question here is if you try it, how long does it take for you to see the differences on the number.
The effect is immediately visible after activation. Dynamic pricing begins immediately, but it is not stated whether or not there is a calibration and adjustment period. What we do know is that the goal of achieving Target CPM is achieved during the billing period, so the algorithm’s performance should be evaluated after that period has passed.
To obtain reliable data when experimenting, a good benchmark is to test the feature on 50% of traffic for at least two weeks.
4. Conclusion
Target CPM does not address the issues of “what should be my floor?” and “when should I update my floors?” Publishers must still manually analyze their bid flow and CPMs, determine an optimal floor for a specific time period, and update all Pricing Rules every day.
The publisher’s AdX revenue did not increase simply because of the target CPM. We assume that Target CPM adjusts floors to keep your eCPM at the same level, rather than to generate additional revenue, as the name implies.
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