For digital content creators, it seems like promising times. Users continue to increase their time spent on digital, and the space easily captures the majority of media ad dollars (over 63% of all ad spend in 2021). Advertisers are projected to allocate $756 billion annually on digital by 2024, with a significant share of their budget going to display ads.
Independent publishers face many challenges monetizing in today’s digital landscape despite the heavy spending. They are often at a disadvantage compared to large publishers with established brands, making it hard for them to attract higher CPMs despite having high-intent audiences.
When monetizing a site, many factors affect how much advertisers will pay per thousand impressions (CPM), such as the country of origin, the audience, and the type of content published, among others.
Low CPMs can become a major problem for many publishers and seem outside of their control. Let’s look into the key factors that may cause this issue, especially for independent publishers with niche audience segments and minimal AdTech expertise or resources.
Relationship Between Ad Revenue and High-Intent Audiences
The most important factor in determining a publisher’s success is its audience. The more engaged readers are, the more likely they stay on a website, and it will be easier for publishers to monetize them. High-intent audiences lead to more ad impressions and, thus, higher ad earnings. Here’s why:
- The number of pages per session: A higher pages/session means more time spent on the site, which in turn means higher user engagement and ad revenue.
- Average session duration: The longer users stay on a site, the more they consume content and interact with ads. This increases the site’s value to advertisers and drives up CPM.
- Session-to-session retention (%): This metric shows how often users return after visiting once — it’s a measure of user loyalty and engagement with the publisher’s content or services, which can translate into better ROI.
Some publishers look at the combination of these factors through a metric such as RFV- Recency, Frequency, Volume. The ideal audience is a loyal one that returns often and consumes a lot. Publishers who create high RFV audiences should see more lucrative returns on their ad inventory.
The trouble is that there’s no one-size-fits-all solution for increasing CPMs. Some solutions will help publishers attract better CPMs, but others might hurt their bottom line. To make the most of ad inventories, publishers must also understand several other factors influencing the CPMs. Let’s have a look at them.
1. Demand Partners
As publishers continue to look for ways to drive more value from their ad inventories, demand partners have become a key part of the programmatic ad selling process. Publishers use these platforms to fill gaps in inventory and find new advertisers.
More than a dozen demand partners, including Amazon and Google, can help publishers monetize their inventory. But the impact of these partners on the publishers’ ad CPMs varies widely. Take the example of Google Ad Exchange. A publisher that relies on Google for up to 80% of its revenue may have no choice but to accept whatever price Google is willing to pay. But for other publishers, the trading relationships with their demand partners offer greater negotiation opportunities.
The role of demand partners is not limited to connecting advertisers and publishers; they have varying levels of influence on publishers’ ad revenue depending on the quality of advertisers they bring on board, ad formats support, bidding rate, and winning rate.
For instance, video inventory tends to be more attractive than display inventory because it can be sold at higher CPMs. Publishers may add video ad space to improve their revenue, but if a demand partner doesn’t support video formats, they are not contributing to fill rates and could lower effective CPMs.
2. Ad Technologies
The media landscape is changing rapidly, and publishers are struggling to adapt their monetization strategies and leverage new digital players who offer higher ad revenue. Many publishers are still using traditional methods of selling media online, which are slow, outdated, and result in low CPMs.
They are relying on waterfall or daisy chaining technologies that allow ad networks such as Google AdSense to work with publishers, match up with advertisers and monetize their ad space available on the websites. With such setups, when an impression comes through, the waterfall platform checks with each network to see if they want to buy the impression first in sequential order.
If the first partner doesn’t want it, then the second partner is called, and so on until someone buys it or all partners have rejected it. Hence, publishers sell their impressions at a historical price. They also have no control over the types of ads that appear or how their ad inventories are priced — this is determined by the ad network’s algorithms based on what they think will generate the most revenue for them (not necessarily what is best for the publisher’s website).
Modern ad tech constantly evolves and requires technical expertise, advertising knowledge, and analytical skills to implement. A publisher needs to know how to extract data from multiple sources, merge them into one place and analyze and decide what kind of ads they should show to their users.
3. Ad Optimization Solutions
The internet is full of ad optimization tips and tricks to help publishers improve their CPM rates and ad revenue. A simple Google search provides several ad ops tips that are logical and work. Nevertheless, the results are often temporary and insignificant because the techniques do not consider a publisher’s specific needs and goals.
The result? Publishers waste time trying to implement a solution that does not consider the specifics of the website and audience, which ultimately worsens things.
Generic ad optimization strategies assume that there exists a singular way to optimize your ad units. These methods rely on simplistic assumptions such as ‘ads with larger images get more clicks’ or ‘ads above-the-fold convert better.’ Other reasons why generic ad optimization tactics cause low CPMs for independent publishers to include:
- The strategies are based on past performance
- They don’t consider the visitor experience
- They don’t consider page-level performance and user behavior
- They don’t consider what’s happening on other sites in the same category and across the web in general (with competitors)
While these tactics may work well in some cases, they often don’t work in the long run. Ad optimization aims to find a middle ground between what publishers, advertisers, and users want.
4. Advertising Stack
The advertising industry has been discussing the importance of a unified ad stack for years. But the benefits of a single, unified stack are just as important to publishers as to advertisers and users.
The problem with fragmented ad stacks is that they often lead to a poor user experience. Publishers must manage multiple sets of data and code, which means more time spent managing those systems and less time focused on their core business. They may lose money because of the inefficiency associated with their fragmented ad stacks.
This is because such publishers are forced to use multiple platforms for each ad unit, so there’s no central place where all campaign data can be managed. That makes it harder to optimize the campaigns or troubleshoot issues with their ads. It also makes tracking campaign performance across different platforms more complex, leading some publishers to make poor decisions about where ads should run based on incomplete information.
This becomes more complicated when you factor in the multiple toolsets (such as ad servers, analytics providers, data providers, etc.) publishers need for different types of advertising. The additional layers of complexity distract publishers from focusing on what they do best — creating great content — while also preventing them from balancing user experience and ad revenue.
5. Programmatic Selling and Ad Operations Support
With the increased adoption of programmatic buying and selling, there is a need to have experienced people on the team who can effectively manage the programmatic selling process. It’s not just about having someone who can manage the technology behind it but also someone who understands how to manage inventory and drive maximum performance at scale.
Publishers must be able to manage multiple SSPs and exchanges, deliver a variety of advertising formats, and optimize placements for maximum yield. Limited expertise in AdTech can reduce the performance of ads on a website. Advertisers may notice that a website may not be able to offer the results they want, despite having high-intent audiences. Thus, their bids and CPMs drop.
Unfortunately, many publishers fail to see the shortcomings of their in-house ad ops team or do not possess the resources and expertise required to become successful at programmatic advertising — resulting in poor ad management that leads to a lack of innovation, which can make it hard for them to compete with larger players in the digital advertising space.
What’s Next?
Now that we have discussed the most common causes of low CPMs, publishers can take these lessons and strategize the best way to improve their revenue.
Publishers may also face more challenges with their in-house ad ops or with their programmatic monetization partners—such as hidden costs, black-box ad solutions, limited insights into ad performance, etc. To understand how these challenges can impact your CPMs, dive deeper into our next posts.
Still not sure why the CPMs are lower than the industry average? Then talk to us.
