Advertising’s Common Denominator: the CPM
ADOTAS — The concept of common denominators is something we all learned about in elementary school, and like many elementary school lessons – cursive handwriting, long division by hand and finger painting – some of us may require a quick refresher course.
Search engines and search marketing affiliates get it – they need to be earning more per click (EPC) than they are spending per click (CPC), and they adjust their marketing efforts quickly and accordingly. It’s an easy set of metrics to match up.
Display publishers and advertisers can easily find some common ground using eCPM — effective Cost per Thousand Impressions.
Typically, inventory is purchased on a CPM model in display advertising. More and more often now though, the advertiser is looking to hit a backend CPA or ROI goal. If the advertiser is willing to be transparent with their reporting, or even better has a pixel to place, the publisher can easily track how many actions or leads are coming in. We can then compare that to how much is being paid for the inventory.
So here’s a throwback to the word problems of 4th grade:
Sally is buying inventory from Website XYZ at a $5.00 CPM rate, or $5.00 for every 1,000 impressions. This inventory has a click thru rate of 2%. She is advertising Offer A which has a payout of $3.00 and a conversion rate of 10%. Is this a profitable media buy?
2% of 1000 impressions = 20 clicks
10% of 20 clicks = 2 conversions
This means when you run the math for every $5.00 you spend you are making an eCPM of $6.00 – a profitable buy for Sally.
Thus, the straightforward math equation of yesteryears can bring you to this understandable solution. Common denominators are not only concepts learned through your childhood education, but also serve to discover the easy solution to profitable partnerships. The simple effective CPM is indeed the common denominator for today’s online advertising.
Reader Comments.
No comments yet
Leave a Comment
Article Sponsor
More Features
Latest News
- Layoffs: A Holiday To Remember December 4th 2008 ADOTAS — A lot of unhappy people will be hitting [...] more »
- Credit Card Free Fall December 4th 2008 ADOTAS — The Internet will end as we know it [...] more »
- Marketers Not Poking Facebook December 4th 2008 ADOTAS — Top marketing people still don’t view social networking [...] more »
- The Rich Still Have More Fun December 4th 2008 ADOTAS — As everyone drowns in the economic tsunami, the [...] more »
- Microsoft buys Yahoo talent December 4th 2008 ADOTAS — By the time Yahoo has a CEO, it [...] more »
- Suing The (Ad) Messenger December 4th 2008 ADOTAS — First it was the media’s fault. Now it’s [...] more »
- Reality Bites Google December 3rd 2008 ADOTAS – Google’s era of open-handedness is screeching to a [...] more »
Features
- Small Business Survival: Geographical Targeting, Audience & Intent December 4th 2008
- Down Year Will Bring Opportunities December 3rd 2008
- Mobile to the Rescue December 2nd 2008
- Ideas On Effective Management December 2nd 2008
- Quality Video: DIY (Cheap) or Else December 1st 2008
Spotlight
Mobile to the RescueADOTAS EXCLUSIVE — The industry is still wary about mobile advertising — does it work, how significant is the ROI [...] more...
Reader Favorites
Classifieds
Recent Comments
- Edward: Ivan, I appreciate your post. I think we do a good job, especially in our
- Ivan: I'm getting tired of all these negative articles. Why not focus on how to make
- Sid Blair: I was laid off several months ago from my agency and while I haven't found
- Hudey: This article doesn't mention our technology, but it's as if this article was written about
