Written by CPM is probably the most popular term used in the online display advertising industry. “Cost per thousand ad impressions” is what CPM means. But most publishers think of things in terms of page views and an ad impression doesn’t necessarily occur every time a page is viewed. Because of this, it is nearly impossible to calculate your ad revenue looking at CPM rates and page views alone. The piece of data that is missing in the calculation is the “fill rate.”
The fill rate is the percentage of the time an ad is displayed. And fill rate is most often not 100%. A publisher might hear that an ad opportunity is worth $2 CPM. But if fill rate is left out of the conversation, this figure doesn’t mean anything. If the $2 ad only fills 10% of the time a page is viewed, the publisher is going to make only $0.20 per thousand page views (10% of $2.00).
Most often, a particular ad space is populated with multiple ads that rotate in and out all at different CPM rates. A lower CPM rate usually means a higher fill rate, and vice versa. Efficient online advertisers rotate the ads in and out to insure maximum possible effective (average) fill rates and CPMs per ad space on a website. Effective fill rate x effective CPM over a period of time equals revenue of a particular ad space on a website. Managing/balancing these rates can be very challenging and burdensome for an individual publisher lacking in time and resources. That’s why it’s a good idea for smaller publishers to work with ad optimizers or for larger publisher to have their own ad operations team.
If you are a small publisher without an ad operations team, choosing an appropriate ad network or optimizer is an important thing to consider. There are many variables that factor into ad performance, and some content simply monetizes better than other content. Usually, it is good idea to run a test with any new advertising provider before locking yourself into any contracts.
In conclusion, asking about CPM rates when evaluating an advertising opportunity on your site isn’t a very good question by itself. In order to actually project the performance of a particular advertisement, there are a lot of variables at play, most notably CPM and fill rate.
