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Why Improving CPM Rates Does Not Always Result in Higher Ad Revenue

Reading Time: 6 minutes

Online advertising is growing at a fast pace, faster than that of any traditional advertising method like print media. At a time when advertisers focus is on finding and delivering content that connects with their target audience, it is natural to expect that media companies and other content creators should be rolling in profits due to the capabilities of online advertising. However, critics argue that too much emphasis on improving display ad CPMs (Cost-Per-Thousand-Impressions) and RPMs (Revenue-Per-Thousand-Impressions) could prove to be counterproductive and lead to a loss in revenue.

With that, it is not all doom and gloom because the right approach to improving CPMs on your website will not have any adverse effect on your ad rates or your per visit earnings (EPMV – or Earnings-Per-Thousand-Visitors). The types of ads and their specific placement possess the potential to impact your CPMs in different geo-locations positively.

In the following article, we will address in detail the type of variables that ultimately lead to improvements in website CPMs and how ad placements and types, when done the right way, can help you fulfill your business objectives via online advertising.

Critics argue that mediums and methods used by traditional advertisers over the years have witnessed drastic changes, but, unfortunately, ad publishers themselves have failed to keep pace with the changing times. Digital ad publishers, on the other hand, have sufficiently evolved to ensure that different visitors on a web property are treated differently depending on how the advertiser chooses to display information; traditional publishers do not take the same approach.

This failure on the part of the publishers costs them dearly whereas a more sensible approach by digital advertisers has allowed them to increase digital marketing and advertising rates at a rapid pace.

Another major point of difference between traditional advertising publishers and digital advertisers is their responsibility for lagging performance indicators by publishers in the way they handle data in comparison to digital advertisers. Digital advertisers use data to give all visitors a different experience whereas publishers dish out the same set of data to everyone. In other words, there is a shallow level of personalization when it comes to targeting prospects.

Sidebar Ad or Top of Page Display Ad—Which is Better?

Reports suggest that US visitors are 40 percent more likely to click on top of page impressions in comparison to ads placed elsewhere on the page. Of course, higher levels of engagement would invariably translate into improved CPM for these ads.

What the data suggests is that if you are planning to place a display ad for consumption by a US audience, you should ensure that the ad is at the top of the page. It is there that maximum attention and higher engagement rates would result, or so one would assume.

It is also worth mentioning that the traffic source also plays a critical role when it comes to the overall CTR (Click-Through-Rate) of the advertisements. It would help if you changed the rules that you wrote to the account for both geo-location and the traffic source showing the display ad.

However, it is important to remember that both geo-location and traffic source are not the end-all-be-all and there are hundreds of other variables of statistical significance that play a part in your overall CPMs. Geo-location and traffic are two of the most important sources and occupy a top position when determining where and for whom you are placing your ads.

Digital advertising does not follow any hard and fast rules. Most account configuration is dependent on the business and the overall goals of the digital marketing advertising strategy. Making sure that you are working with certified agencies is essential. Working with a Google Ads Partner would be even more so.

Keep in mind, a strategy that may work for one business may not be suitable for others. In regards to the study above, the higher CTR and engagement for the top of page impressions in the U.S. was only representative of 50% of the website clicks. Acting on this information could only improve CPMs for 50 percent of the sites, whereas around 50 percent of the rest of the clicks come from other places.

Advertisers are generally under the misconception that improved CPMs will result in higher revenue. Well, that’s what it is — a misconception. Improved CPMs will not result in higher revenue; in fact, the way to higher revenue goes through higher value ads that are more likely to enhance users’ engagement.

In a nutshell, what it implies is that attempting to generate improved CPMs is the wrong goal. Improved CPMs often proves to be counterproductive as any misplaced advertising to optimize CPMs often results in lower ad earnings. Make sure that you lay extra emphasis on user engagement if you wish to increase the value of impressions you have paid for with the ad space.

How to Increase Website CPMs without A/B Testing

A/B testing almost always leads to A/A implementations. A/A implementations mean that the result for all the participants in the test is the same. It could have some significant impact as this invariably means that nothing concrete gets established despite running the tests on hundreds or even thousands of websites.

All this means is that this testing still doesn’t give us enough data to help us determine one sure shot method of developing something that would have a positive impact across the spectrum.

So, What’s Better than A/B testing?

Experts believe that artificial intelligence (AI) could offer the real solution to this conundrum. A majority of advertisers have already jumped on to the bandwagon, and experts believe it is now the time for publishers to follow suit without any additional delay. Some of the significant advantages or benefits offered by artificial intelligence (AI) over traditional A/B testing are as follows:

  • Reduces data mining.
  • Need for hard coding is eliminated.
  • An expert does the math.
  • It is easy to manage data patterns.

An expert shared a simplified example of how a machine applying artificial intelligence can deduce the characteristics of a dog over some time. A machine exposed to a few dogs over a specified period could determine the factors that could prove to be most helpful in determining the attributes of a dog.

AI can help determine what is IMPORTANT in data

Taking the dog example, AI can determine that a dog is a mammal that walks on four legs. This type of model could prove to be most successful in analyzing the best place for ad placement to increase the overall CPM and revenue of a website.

Scientists believe that this model of A.I. is similar to the way human learning works with neurons in the brain. Human brains over time develop the ability to understand and differentiate the criteria needed to make informed and intelligent decisions based on different available alternatives. AI replicates the human learning process as this form of learning and problem solving is much more efficient as compared to writing long algorithms with hundreds of data points.

It Pays Well to Know Your Audience

You need to know your audience well. Knowing your audience will help you determine what the audience values and you can tailor your content accordingly. Understanding an audience is what building value in your website’s ad space is all about. Going through extensive marketing evaluations that include data-driven statistics and modeled marketing questions are the only way to gain this understanding.

The right data management platform (DMP) will help you understand and segment your readers and viewers based on granular behaviors. Your sales and marketing team will find the going much easier as they can price and sell these audiences accordingly – instead of shooting arrows in the dark and trying to make a sell based on content or context. These packages can also go into an SSP or another platform for programmatic access.

To Wrap This One Up

Summary statistics are uninformative, and you cannot base your entire decision making on this single criteria. Doing so could prove to be disastrous as it would lead to acute waste of money and other valuable resources without any gain to show for your efforts.

Digging deeper into the data is imperative as applying the same ad positions to every visitor has not even the faintest chance of working. It is of little significance how many A/B tests you run because if you don’t change things per visitor, you’re setting yourself up to be on the losing side of the battle.

Advertisers have been most successful because they honed the skills of change with the changing times. They have been adapting to different visitors in some form for more than a decade now.

Unfortunately, publishers have displayed a sharply contrasting behavior as they have been selecting ad placements the same way for as long as one can remember. This lack of innovation and ability to change with the changing times has proved to be their undoing.

Fixed locations, or in other words lack of innovation, is sure to drive visitors away. A feeling of ennui or boredom is likely to set in which will invariably result in shorter sessions or a more aloof engagement with placements, which means what?

The answer is higher CPMs and overall lower per visitor revenue.

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Written by Robb Fahrion

Robb Fahrion is a Co-Founder and Partner of Flying V Group. Robb has helped over 350+ companies build their businesses online and is responsible for building Flying V Group into one of the premier marketing agencies in the United States. Robb and his team have managed over $10M in marketing budget and continue to accelerate the growth of clients' businesses. A love for business and competition is what fuels Robb to create dynamic marketing plans to help his clients grow exponentially.

January 24, 2019



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