Target CPM – What is it and does it increase ad revenue?

Reading time: 4 minutes

Online advertising has become one of the lucrative fields for experienced digital marketers. Stats show that there are 4.66 billion internet users globally and more than 2.14 billion online purchasers. If you’re new in this field or have a young online website, you may find it challenging to understand some of the concepts that apply in online promotions. One of the terminologies you’ll come across is the cost per mille (CPM[1]). You need to understand various vital aspects of CPM, and the knowledge will assist you in delivering result-oriented online marketing campaigns.

What is target CPM (tCPM)?

Floor price enables publishers to create a minimum price for their ad spaces. If a bid comes up for an ad unit[11], it’s evaluated as per the floor price. For optimal fill rates, publishers steer away from creating high floor prices. And this may result in selling their inventory[12] at a throw-away price, thus underutilizing the real potential of their list. Due to this dilemma, Google created Target CPM on their Ad Manager portal.

Target CPM (or tCPM) is a dynamically allocated floor price for an advertisement unit. The price can be higher or lower than the floor price set by the content creators. Google Ad Manager[2] created tCPM to equalize the arriving bids actively and retain the target eCPM[3] of the website owner.

How does target CPM influence the header auctions?

Header auction enables the simultaneous sale of ad inventory[6] to direct and programmatic advertisers. The procedure happens in one unified auction rather than in a splintered manner. The advantage of this procedure is that every purchaser has the same opportunity to bid on the same ad space, which allows for enhanced competition between bidders. And this means improved revenues for publishers.

When running header auctions with a set target CPM for your ad spaces, you should communicate the floor prices to partners. In specific cases, price proposals from partners may be lower than tCPM, and ad servers[7] may avoid them. Thus, the best strategy is to create corresponding floor prices for supply-side platforms taking part in your header auctions. You can achieve this through a header wrapper[8] or SSP[4] dashboards.

How to set up target CPM in Google Ad Manager?

If you’re a Google ad Manager (GAM[5]) publisher[13], a target CPM feature is available for you on the platform. You can activate the feature when setting up price rules for your ad spaces. Currently, Google is moving from second-price auction to unified first-price arrangement, and two scenarios exist:

  • Open auction pricing rules.
  • Unified pricing rules (UPR).

Although Google has moved out of open auction pricing rules, the feature is still available for publishers.  According to Google, 3 per cent of Ad Exchange[9] traffic will come with the second-price bid for a brief duration. And this is the reason sellers shouldn’t leave the visitors without any floor prices. So, here we explain how to create a target CPM through both pricing principles.

  1. Open auction pricing rule

If you can create an auction pricing rule, below are the steps to follow:

  • Get to inventory and choose Ad Exchange rules
  • After choosing the pricing rules, select the inventory type. Here, you’ve options, like Display, Mobile app, In-stream, video or Games. These choices help you to define pricing rules.
  • Suppose you want to set up rules for a Display Ad Inventory. Start by clicking on the new display rule to develop new regulations for the inventory. After setting your rules, name your pricing principle and create its order[14] of priority. Get to the targeting[15] area on the same page and choose the inventories applicable to targeting. Y
  • Create targeting and in the pricing area, choose ‘Set target CPMs’ and save.
  1. Unified Pricing Rule (UPR)

You can use unified rules in setting up tCPM. Here are the steps to follow:

  • Go to inventory and find pricing rules 
  • Select New unified pricing rule and mention it for reference
  • Create targeting and pricing area, choose ‘set target CPMs’
  • Save

How to Optimize target CPM in Google Ad Manager?

Google Ad Manager offers multiple chances for publishers to perform A/B testing and maximize their Ad income. Through Google’s ad server, you can take advantage of the Opportunities feature to find out if your target CPM is performing optimally. As a publisher, you can only perform a deeper evaluation of the target if you conduct different experiments and analyze information by altering tCPM figure for the inventories. You can perform experiments on Ad Manager using the following steps:

  • Get to the Google Ad Manager home page and click the button Opportunities.
  • Tap View Opportunities to choose the Opportunity type. 
  • Choose ‘Enable Target CPM on Unified pricing rules.
  • Click the experiment tab and key in a name for the Experiment. For example, you can enter Test_t_CPM1 and set the start and end dates for this Experiment.
  • Once you’re through, choose the percentage impressions to provide the traffic to the test—Tab Start experiment.

The above experimental steps enable Google Ad Manager to run a trial for a specific period and generate a report that publishers can evaluate. You can create the report by getting to the ‘report’ and clicking ‘Experiment’. While analyzing the info, find out the effects of new changes on the performance[10] of the various items that target CPM focus on. Besides the manual reports, Google Ad Manager can offer you helpful tips and suggestions on the best techniques for optimizing your tCPM rates.

You can disable the tCPM feature for various things by changing the settings in Google Ad Manager. 

Conclusion 

When Google changes bids automatically, it intends to assist publishers in benefiting from multiple impressions via tCPM. For the best results, publishers should be patient and wait for at least 48 hours to enable the ad server to evaluate the performance of demand partners. In summary, the central role of tCPM is to improve your ad fill rate[16]. As a publisher, you can reap multiple benefits and strengthen your impressions if you follow the steps in this article.

Terms
1. Cost Per Mille/Thousand [CPM] ( CPM ) Cost per mille, or thousand (mille = thousand in Latin). A pricing model in which advertisers pay for every 1000 impressions of their advertisement served. This is the standard basic pricing model for online advertising. See also CPC and CPA.
2. Google Ad Exchange ( Google Ad Manager ) Ad Exchange is often referred to as the premium version of AdSense, and also a Google-owned ad network of sorts. To join Ad Exchange, publishers need to meet specific requirements such as 500 000 minimum monthly traffic, be invited or join through a Google certified partner. Recently Google has rebranded this product, and it is now called Google Ad Manager.
3. Effective Cost Per Thousand Impression [eCPM] ( eCPM ) eCPM is known as the effective cost per thousand impressions and is a metric used by publishers to determine the actual rate they’re earning from their ad inventory. eCPM is calculated by taking your (total ad earnings/impressions) x 1000.
4. Supply-Side Platform [SSP] ( SSP ) A technology platform that provides outsourced media selling and ad network management services for publishers. The business model resembles that of an ad network in that it aggregates ad inventory, however they serve publishers exclusively and do not provide services for advertisers (e.g., FreeWheel, SpotX).
5. Google Ad Manager ( GAM ) Google Ad Manager is a combination of both Google Ad Exchange and DoubleClick For Publishers as a unified platform that provides publishers with ad serving services.

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