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5 factors that determine your advertising CPM rates

An interesting post at Techcrunch: Pubmatic Data Suggests Small Sites Command Higher Rates For Remnant Ads Than Large Sites.

I love seeing this cross-site ad monetization data, since it’s rare to get your hands on it unless you work for an ad network. For people outside the ad industry, advertising CPMs seem like black-boxes.

How to guess CPMs – 5 factors
At Revenue Science, a regular game of mine was to eyeball a site and guesstimate the CPMs.

A couple of the factors that I’d use:

  1. Is the site “sticky” or is it a one-hit wonder (like a reference site)?
  2. Is the site pretty general, or is it in a particular category (like cars)?
  3. Who uses the site? Everyone (including international) or just US?
  4. How dependent is the site on Google SEO versus a community site that draws people back?
  5. How many pageviews does the site have? Is it a lot? Or is it a small amount

Easy to monetize, hard to monetize
For the people who are curious, this is the easiest to monetize:

One-hit wonder site that exist in a particular category, are based in the US, and have lots of search traffic

In particular, your site is likely to have high CTRs since people are in a “transactional” mode. If you have all of those, and have a ton of pageviews, then you’ll make a ton of money.

The hardest to monetize?

Highly sticky sites that are general (like communication), based 100% outside of the US/Europe/Japan, with lots of pageviews

In a setup like this, not only are people unlikely to want to buy anything, even if they did, there’d be no way to make money off of this group.

Example categories
As a rough rule of thumb, I’d typically guess the following – these are very rough approximations, just to illustrate a couple points:

  • Social sites (forums/chat/etc) without direct ad sales teams: <$0.25 CPM
  • Largely international sites: <$0.50 CPM
  • Medium-sized sites that use banner ad networks: <$1 CPM
  • Reference sites in a specific category: >$5 CPM or sometimes much higher, depending on category – we ran into home improvement reference sites that did $20 CPMs

Because we were mostly dealing with so-called “remnant” advertising, these numbers are likely to be at the bottom of the range for these sites. That is, social networks might quote a CPM of $20 CPM, but what they really mean is that 1% of their inventory is sold at that, and the rest of the 99% is sold at <$0.25 prices.

As you can see, as a website property, you fall into either of two categories:

  • Horizontal sites used daily which command low CPMs with huge pageviews
  • Vertical sites that capture user intent – often used intermittently (with lots of traffic from search) with high CPMs and low pageviews

Horizontal sites, when scaled up to a large enough site, can employ direct ad sales teams that raise the CPM by a significant amount, but the entire process is demand-constrained.

Google is lucky to be both horizontal and vertical – it’s used everyday by people, but also captures user intent.

As stated before, social networks monetize poorly

Of course, sites with lots of pageviews are often ones that are general, are sticky, and have lots of context-less social content. I’ve written up a broader discussion of social network monetization at “5 things that make your social network monetize like crap.”

Back to small sites versus large sites
Now, the Techcrunch article discusses the idea that small sites monetize better than large ones. I think that’s actually a correlation rather than a causation. There are a ton of small sites out there, and much of their traffic comes from Google. It’s much harder to build a functioning social site where people coming back daily than a site where people occassionally stumble on it through their search engine.

As a result, my guess is that the mindset of the typical user includes intent – and that makes all the diference.

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