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What’s a ‘Good’ CPM in Programmatic Display?

Greg Sobiech   
April 11, 2018  
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  1. What is a fair price for a cup of coffee?
  2. How much do I need to pay for a house?
  3. What is an average price for a dinner?

These and many other similar (broad) questions have one, very annoying, answer – it depends.

The same philosophy applies to CPM pricing in Programmatic Display.

Think about CPCs in Paid Search. The cost per click that you will pay depends on the value of a keyword to all of the auction participants. Programmatic Display likewise has many different flavors (programmatic guaranteed or PG, private marketplaces or PMP, or real time bidding or RTB). The pricing mechanics behind RTB are very similar to how Paid Search works; buyers or demand-side actors’ willingness to pay a certain amount for 1,000 impressions determines the market price.

However, just as with Paid Search, for any set of impressions there may exist wide discrepancy in pricing. This post aims to provide certain ‘guardrails’ to help you orient yourself when thinking about CPMs.

(A few notes: for the sake of simplicity, we are focusing on a) Banners that were b) bought through RTB using c) DoubleClick Bid Manager or DBM. Why DBM? Because DBM – being a Google product – is the only DSP that has access to Google’s powerful (and free) audience intent data, plus DBM’s technology costs are relatively inexpensive, which translates into some of the lowest CPMs in the industry.)

The below table roughly lays out what we believe to be fair and expected CPM ranges for different Programmatic campaign types, followed by a detailed explanation of how we got to those assumptions.

(Note: feel free to skip the detailed explanations below, and scroll down to the section about ‘dynamic CPM’ – where you may learn that CPMs actually matter less that you think!)

Basic Campaigns / gray ($0.50 to $15 CPM)

      1. For a basic or ‘run of the mill’ RTB and Banner Programmatic campaign, we’ve bought media with CPMs as low as $.50, and as high as $15 (15x difference between the min and max CPM – a huge jump if you’re thinking there’s a “right” CPM range.)
      2. We’ve been able to run campaigns at $.50, because:
        1. Brand safety – DBM or Google offers free Brand Safety settings (which normally can cost up to $.25 is purchased through Integral Ad Sciences or DoubleVerify)
        2. Audience data – DBM offers audience data, including very powerful Custom Intent audience data, for free.
        3. Creative – can be served for free out of DBM.
      3. Given the above assumptions, why pay a $15 CPM when I can pay just a $.50 CPM?
        1. Simply, at $0.50, you may not win any auctions. Your “impression loss” (share of impressions which you lost the bid for) may be so high that you won’t scale the campaign.
      4. So, what CPM should I bid?
        1. For an RTB auction, create several Line Items, with CPMs at $1, $2, etc.
        2. Measure how many impressions you are able to win at those CPMs, look at your CTRs, and ultimately your ROI. Bid on a CPM that delivers the highest ROI. Remember that the CPM is just a mean to a greater end, i.e., highest ROI possible.

Premium Audiences ($5 CPM or more)

      1. Any time you are buying audience data from a 3rd party provider, you will need to pay anywhere from $.50 to $3 CPM – just for the data alone.
      2. We often pay a $2 CPM, and that’s a good benchmark to use for the sake of estimation.
      3. Given that your media alone will be priced at a $2-3 CPM (what the publisher receives + DSP tech costs), a $5 CPM for this campaign type is a good “starting” CPM.

Data-Driven Creative ($7 CPM or more)

      1. The moment that you start to serve dynamic creative, especially data-driven or machine-learning creative, you will need to incorporate at least $1 CPM for the delivery of that creative.
      2. For instance, you can partner with vendors who offer “programmatic creative”, and between the upfront set-up costs and the variable CPM, your effective CPM will be close to $1.
      3. You can also license technology from Google (e.g., DoubleClick Studio – just the technology costs alone will be about $0.75 – and that excludes your costs of creative production).
        1. If you are running machine-learning creative, you may need to add another $0.75 CPM for the cost running of algorithms within data science platforms such as Google Cloud.
      4. Thus, if you are running RTB Programmatic, with Premium Audiences, and with data-driven Creative, your overall CPM will be at least $7, but likely more.

Programmatic Guaranteed or Private Marketplaces (PG or PMP) ($15 CPM or more)

    1. For PG or PMP deals, different rules apply – the majority of the CPM is going to be the cost to the publisher.
    2. Also, in PG or PMP, the publisher has a lot of say over the price – this is not an auction.
    3. Thus, the CPM for this type of a deal is bit of a moot point – the publisher sets the cost, you have little power to negotiate, and the CPM ‘is what it is’.

Dynamic CPMs

But all of that aside, it’s important to note that “Dynamic CPM” may soon be taking over.  dCPM was the big news of the late 2017. Just as Google is moving AdWords to ‘dynamic CPC’, they are also moving the industry towards ‘dynamic CPM’.

What does this mean in practice? The concept of a ‘good’ CPM is becoming less and less relevant as a static number. In our work with clients, we find that while ‘dynamic CPMs’ tend to be higher than ‘static’ CPMs, the inventory quality tends to be higher, so are CTRs. In fact, CTRs are so much better that often the high(er) CPMs lead almost counterintuitively to higher ROI.

At the end of the day, don’t dwell too much on CPMs. While CPM is a piece of information, it should not be the data point you base your decision on. Rather, think about the end goal – maximum ROI for a given budget. CPM is just a means to your larger goal, which is Sales Growth.


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