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YouTube CPM Rates: What you Need to Know

That funny cat video you just watched on Youtube might just be making someone some very real cash. Your business can benefit from that exposure, too! Knowing what you need to do and how to do it is extremely important and knowing about the YouTube CPM rates is a start.

Youtube can be great for all kinds of fun content, but on the other end of it, there is often some serious planning and financial consideration!

One of the main concepts involved in making money online is Youtube CPM rates. If you’re new to the world of digital advertising, keep reading! The following is an introduction to the basic concept of advertising online.

The Basics

This might seem very obvious, but we’ve got to start with the basics. Advertisers always want to have their message where there are lots of people, right? For decades (even centuries) this has been done offline.

If you rode the subway in New York City 50 years ago, there were ads. When you walk down the street or drive on the interstate, there are billboards. When you turn on the TV today, just like at any point in history that TV was around, there are ads. 

So, it’s no real surprise that Youtube and other online platforms have their own advertising world. 

Content creators on Youtube want people to watch their stuff so that advertisers pay to have ads placed there. This is not much different than TV or radio over the years. 

We specialize in modern digital marketing and can help you or your business navigate the world of online ads. 

In all cases, the more people that are exposed to your ad, the more it costs. That brings us to the main idea: CPM rates.

What Are Youtube CPM Rates?

The term CPM stands for “cost per mille” (mille is Latin for thousand, as you surely know). So, a CPM rate is the cost of advertising for each one thousand people that are exposed to the ad. You can just think of CPM as “cost per thousand.”

You might come across the term “RPM,” which stands for “revenue per thousand.” This is a similar idea, just from the perspective of the people selling the ads. As a person buying the ads, you’ll have to pay the CPM. RPM would be the amount a person earns from selling those ads. 

CPM Formulas

The calculations involved in CPM are fairly simple since it’s just based on the rate per thousand people (or “impressions”).

To calculate the total cost of an ad campaign: divide the number of views you want by 1000. Then multiple by the CPM rate.  If you want to reach 50,000 people and the rate is $2.50, you would take 50,000/1,000 and then multiply by $2.50 to get $125.00.

If you want to calculate the CPM rate (and you already know the total campaign cost), you would divide the total number of impressions by 1,000 and then divide the total cost of the campaign by that number to arrive at the CPM rate.

To calculate the number of impressions you’re getting, divide the total cost of the campaign by the CPM rate, and then multiple by 1000. 

If this looks complicated written out, it’s really not! Try it out with a calculator and a piece of scratch paper. 

Impressions

The number of people here actually refers to the number of “impressions.” In online advertising, an impression is each instance of a website being accessed and loaded.

So, if an ad comes up when you go to your favorite news site, that is one impression. If someone pays for the ad to appear on both the side and bottom ad space on the website, that counts as two impressions. 

If you want to advertise your small business, you might purchase advertising for 100,000 impressions. This means that the digital marketing company will assure that your ad comes up 100,000 times over a specified period of time.

So, a CPM rate is the amount of money you must pay to have your ad seen for every 1,000 impressions. This amount is usually around $1.00-$9.00. For Youtube, the average CPM rate is $2.00.

If you wanted to reach 100,000 people, at a CPM rate of $2.00, you’d pay $200. (100,000 / 1000, then multiply by $2.00)

The number of impressions could actually be slightly different than the number of individual people. There could be one than one ad on a site that someone accesses (as mentioned above) or if the same person loads the website multiple times, each time would count as an impression. 

CPM is Not “Per Click”

It worth noting that CPM is not the same as CPC (cost per click). With CPM, it doesn’t matter if a person clicks on the ad or not, the cost is the same. With CPC, the amount you’re charged depends on the number of actual clicks your ad gets. 

There are other pricing models where a customer has to actually spend money in order to be counted toward your “thousand” people. 

Obviously, if you are paying for advertising, the end goal is for customers to purchase what you’re selling. But even just exposing someone to the ad, off to the side of whatever they are actually looking at on Youtube, Facebook, or Google, is beneficial.

All those little nudges to buy a product add up over time, and maybe the 10th or 100th time you see an ad for certain dog food, or popcorn, or mattress, you finally buy it.  That’s why this model of pricing is so common.

Each of these has it’s own purposes, but CPM is the most popular way to sell online ads. 

What Determines the Rate?

There are lots of factors that go into determining a specific rate for an advertising campaign. 

Target Audience

Different types of audiences are willing to pay different amounts for products. So, if the target audience for your ad is high school students it may be a cheaper rate for ads than if your audience is physicians. 

The products that a group of doctors will buy will cost much more than the typical products a high school student will buy, so the ad space is more valuable. 

This is not to say that one audience is better than the other–you just need to be aware of the right market. Selling a thousand water bottles to high school students is just as good as selling one vacation package to a doctor.

We can help you determine the best places to run your ads so that they reach the intended audience! 

Timing

Just like a commercial during the Super Bowl is more expensive than a typical Tuesday afternoon, the timing of your digital advertising affects the cost. 

If you want to have your ad on Youtube show up during a major holiday or big shopping days like Black Friday or Memorial Day, the CPM rate is going to be higher.

There are also seasonal factors besides holidays. Some products sell better at certain times of the year, and the ads will cost a bit more during those times. 

Geography

The popularity of various products and services varies by geography, too.

So, if you are advertising a bed and breakfast, the CPM rate might be higher in a picturesque vacation spot. If you are selling snowblowers, it might cost more to get ad space to run in the winter in the midwest.  

Economic Outlook

The overall economy will affect your individual CPM rate. If there is strong confidence in the economy, people are willing to shop more and pay more for ads. So the rate might be a bit higher. 

If there is not much confidence in the economy, the rates might be a little lower, but you also may not get as much in return, since people tend not to spend as much when they’re worried about the economy. 

The worldwide Covid-19 has been rough for businesses of all kinds as economies have been shut down for months.

But, as markets are opening up again, CPM rates have actually doubled recently, from an average of $5 to $10. Yes, it’s a bit more expensive, but it means that people are ready to start spending again! Hopefully spending their money on your product. 

Current Supply and Demand

The digital advertising market, like the economy in general, changes all the time. The forces of supply and demand affect the price of everything, and online advertising is no exception. 

Your rate will depend on how many other people are wanting the same ad space and how much space is available at the moment. 

The Device the Ad Will Appear On

It is true we’re all on our phone all the time, but we still tend to make purchases on a computer rather than a smartphone. So, another factor that affects the CPM rate is where the ads are being shown.

It’s still great to have your ad show up on a tablet or phone, but it’s easier to actually make the purchase, or even sometimes see the whole ad as intended, on a laptop or desktop. So, the CPM for ads that show up on laptops and desktops tend to be a little higher. 

The Click-Through Rate

A click-through rate (CTR) refers to the percentage of users that actually click on an ad when it is shown.

The CPM rate isn’t really supposed to be affected by the number of people that actually click on it since the whole model is based on the number of times the ad simply shows up.

However, while the price isn’t calculated by click-throughs, the click-through rate does factor into how valuable that ad space is generally. So, the CTR does actually affect the price of the CPM, even if it’s indirectly. 

You could think of this factor as the effectiveness of the advertising space.

Why Hire a Professional?

Running a business comes with tons of issues to worry about besides trying to figure out the best way to advertise on Youtube or other websites. 

Just like you focus on making the best T-shirts or providing the best legal service, or whatever business you run, we focus on our task: digital marketing.

We know the ins and outs of the industry and are transparent with you about what is going on. Many other companies won’t disclose their strategies or exactly where your ads are being placed. We strive for transparency. If you are interested in the nuts and bolts, we’ll discuss it with you!

If you’d just like to see results, that’s okay, too. 

We have worked with all kinds of companies, from small businesses just starting out, to large corporations on the Fortune 100 list. We can work on any type of scale that is appropriate for your business. We only collect a fee for the results that we actually bring about. 

Find out about our 3-tier ad strategy

It is actually a great time to get into digital marketing and expand your business! A professional can help you leverage the power of online advertising to sell your real-world products. 

Contact Us

If you are ready to take advantage of our expertise in digital marketing to help advertise your company or monetize your Youtube channel please contact us today!

This guide has given you a brief overview of Youtube CPM rates, how they are calculated, and how you can digital marketing to advertise your product or service. 

To learn even more about digital marketing, you can also check out our blog here. It has even more great posts about similar topics. 

Check back for more information and contact us to discuss how we can help you accomplish your online advertising goals!

Thank you are paying too much when it comes to YouTube CPM rates? Contact us by clicking this link to find out how to lowery your CPM with YouTube.

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