In 2015, the Interactive Advertising Bureau reported that 2014’s total ad spending reached a record high of $49.5 billion – a 16% jump over the previous year. Two-thirds of that revenue was attributed to performance based advertisements and 1/3 to the CPM model.
With $16.5 billion being spent on CPM advertising, the CPM model is still hanging in there as a viable revenue model for bloggers who wish to monetize a project that probably started out as a hobby launched in an insomnia-induced fog at 1:00 am.
The CPM model is a more predictable revenue-generating advertising model than CPC and affiliate marketing because bloggers most likely know their average monthly page views. And, for advertisers who are most interested in brand awareness than the immediate sale, bloggers who offer CPM advertising are the best fit.
Advertisers who choose CPM do so because they prefer the predictability of a fixed campaign. Affiliate marketing and CPC – both performance based models – do not allow advertisers the same predictability.
The CPM advertising model provides brands with fixed pricing, fixed placement, fixed timings (the length of time the ad will run) and fixed delivery (the amount of impressions the ad will receive based on the blog’s average monthly impressions). This type of security is not always available with CPC or affiliate marketing. Some marketers argue that advertisers benefit best when they operate on a dynamic CPM model instead of a fixed CPM.
In the predictable fixed-pricing ad model, it is assumed that advertisers have a specific parameter they want to optimize. Let’s assume that brands want to use CPM to optimize brand awareness. The desired final result of their fixed-priced campaign (optimized brand awareness) can’t be predicted; therefore, even though the budget for their CPM campaign is predictable, the results are not.
#2. Low expectations
Bloggers who blog often, create highly-engaging content and generate a high volume of traffic will find that adding CPM ads to their blog is one of the easiest ways to generate revenue.
But, the CPM model requires very little of bloggers. Advertisers provide the script that delivers the creative. The blogger adds the script to her blog and ensures the code displays correctly. If all is well, blogger’s obligation has been fulfilled.
CPM encourages very little cooperation between the blogger and the advertiser because the nature of this ad model doesn’t require it. Bloggers don’t concern themselves with click-through rates for any CPM ads on their blog. They don’t have to. With performance-based ad models, bloggers are more likely to work with advertisers to ensure that their ads perform well because they are paid for performance, not impressions.
Bloggers who rely on performance-based ad models rely heavily on many factors that are out of their control. The quality of the service or product, the price and even the ad creative are all factors that determine how much money the blogger makes. Poorly designed ads have a relatively low click-through rate. Since the CPM model pays bloggers for impressions, not clicks, poorly designed ads are not the blogger’s problem.
Harmelin Insight predicts the following for 2016: “Search CPMs are expected to increase 3-4%, about the same as 2015. While digital ad spending is forecast to increase by double digits in 2016, mobile, online display, and online video CPMs are expected to remain relatively flat due to a seemingly endless supply of inventory, combined with efficient programmatic buying, and both factors will work to keep CPM growth in check.”
This article first appeared on Huffington Post.