What is Target CPM in Google Ad Manager?

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It’s common for publishers to use a metric like CPM[1] to compare the performance[6] of ad partners on their site. Cost Per Mille (CPM) is the amount advertisers are willing to pay for one thousand impressions on a publisher[8]’s website. There are many factors that play a role in determining CPM, like content, advertiser[7], geography, audience demographics, and intent. As a result, CPMs values can vary widely by site and by advertising partner.

While useful, a metric like CPM doesn’t give a publisher a full view of the true revenue potential of their site, since it does not take into account important factors such as lost or unfilled impressions[2]. Publishers can take these factors into account by using a metric called effective CPM (eCPM[3]) which divides their revenue by all possible opportunities to serve an ad. 

Taking a closer look at lost impressions, this could be a result of a publisher encountering below market value for their impressions. For example, a publisher might be expecting to sell at $2.00 CPM, but  is only selling at $1.50 CPM. The difference may not seem like a lot at first glance, but for a site that has millions of impressions, those cents can add up quickly. 

So, how can a publisher ensure their ad impressions don’t sell at a rate lower than the market value? They can implement target CPM (tCPM) in Google Ad Manager[4].

Understanding a Target CPM

A publisher can implement tCPM — a dynamic floor price that allows Google Ad Manager to increase or decrease existing floor prices while maintaining your eCPM. 

You may be wondering how this differs from setting a floor price in Google Ad Manager. A floor price is setting a minimum bid where there’s a fixed CPM (ex. All bids must be at minimum $1.50 regardless of the type of inventory[9]). tCPM is an alternative to floor prices that leverages Google’s machine learning and dynamically adjusts the floor price based on the inventory. 

Setting Up Target CPM in Google Ad Manager 

All Google Ad Manager publishers have access to the tCPM feature available on Google Ad Manager. You can easily set it when creating your pricing rules. 

How to create Unified Pricing Rules

In your GAM[5], follow the instructions below to create these pricing rules.

  1. Navigate to Inventory > Pricing rules.
  2. Click New unified pricing rule.
  3. Enter a name for the pricing rule.
  4. Next to “Targeting,” select the inventory to which you want this rule to apply.
  5. Next to “Pricing,” select Set target CPMs.
  6. Click Save.

Optimizing Target CPM in Google Ad Manager

In Google Ad Manager, publishers have the opportunity to do A/B testing to optimize ad revenue. A/B testing tCPMs on a percentage of your impressions is a great way to see tCPMs effectiveness and make changes to this pricing rule accordingly. 

Here’s how you can run experiments on Google Ad Manager:

  1. In Google Ad Manager, select Opportunities.
  2. Click View opportunities to select the Opportunity type. Select Enable Target CPM on unified pricing rules
  3. Click the Experiment button to run. 
  4. Enter a name for the experiment. 
  5. Set the Start Date and End Date for the target CPM experiment.
  6. Select the % of impressions to allocate the traffic to the experiment. 
  7. Click Start experiment.

Once your A/B test is complete, Google Ad Manager creates a report for you to analyze. This report can help you determine how best to move forward with tCPMs. It’s recommended to run A/B tests for at least several days (up to a week) to get enough data to analyze. 

Conclusion

tCPM is an effective method to ensure your ads are selling their fair share of market value. As a dynamic floor price, Google automatically alters the bids to help publishers get as many impressions as possible. tCPM helps publishers optimize ad revenue and maximize ad fill rate[10]

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. Blank Impression ( unfilled impressions ) Blank impressions are also known as blank ads or unfilled impressions and occur when blank ads are displayed on a website. No publishers want blank impressions as these ads don’t result in ad revenue. Many reasons for blank ads can exist such as not having enough advertiser demand, low page loading and having too high CPM floors.
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. 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.
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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