If you are new to the wide, wonderful and, let’s be honest, a little complex world of online marketing, you may have been scratching your head at the barrage of acronyms and unfamiliar terms being thrown your way. Fortunately, things aren’t nearly as scary as they can first look.
As you begin your YouTube career and start looking into the possibilities of earning money through the platform, you will no doubt hear the term CPM a lot.
It should be noted that there are many important factors to succeeding financially on YouTube, but CPM is the closest thing you’ll get to a single metric of success since it is possible to have millions of subscribers and still barely make any money because your CPM is poor.
Similarly, someone can make enough money to pay the bills on as little as tens of thousands of subscribers because their CPM is excellent. The new metric RPM may tell you exactly how much you will make but it doesn’t tell you the whole story like CPM.
But what is CPM? And how does it work?
What is CPM?
CPM is an acronym for “Cost Per Mille”, with mille being the Latin word for “thousand”. In simple terms, it is a unit for measuring how much money a thousand views are worth. As an example, a YouTube video with an average CPM of $2 and a total of 10,000 views would earn its creator $20.
You might be understandably underwhelmed by this figure, but $2 is a relatively common average for online CPM. This is also why many YouTubers look to other means of monetising their content.
One common misunderstanding about CPM is the belief that it is a set unit in the way you might think of currency. The CPM of a video is not something that is determined in advance, but rather something that is calculated after the fact based on how the video performed (or is performing).
What Determines the Value of CPM?
So, with that in mind, what are the factors that go into calculating the CPM of a video? At its most basic level, there are only two significant factors; the value of your video to advertisers, and the engagement factor of your audience.
The first of those factors—the value of your video to advertisers—is largely determined by how lucrative your niche is. Advertisers want to put their ads in front of people who are likely to be interested, so they’re not going to pay to put their ad for solar powered garden lights on your video about vintage cars. Sure, there might be some people who are interested, but the advertiser can’t be sure of that, whereas a video about garden landscaping is a much safer bet.
The more competitive your niche, the more your video is worth to advertisers since the very demand for advertising space in that niche drives the value of the ad up. It is essentially a bidding war, with the advertisers who are willing to pay the most being the ones that get their ads on the video. For niche’s with not much competition, the advertisers can get that space for considerably less, which means less money for the creator.
The other factor—the engagement of your viewers—is probably one of the most underappreciated aspects of monetising YouTube content. It is not enough to simply get a lot of eyeballs on your videos; those eyeballs have to engage with the advertising for you to make money. That is how some YouTubers can be financially successful with a relatively small subscriber-base while other YouTubers with enormous followings barely get by.
Those may be the two most significant factors contributing to how large your CPM is, but there are other things to take into consideration that are also important, such as watch time.
There is a limit to how many advertisements you can cram into a finite space of time, and YouTube is well aware of this limitation. You can bet that the calculations regarding getting the largest amount of ads possible into a video while putting off the least possible viewers is constantly being revised.
Still, regardless of how much time there is between ads, we can take one general rule as a given—the longer someone is watching, the more ads they are likely to see.
YouTube presently has a ten-minute floor on mid-roll ads, meaning your videos need to be at least ten minutes long to have ads sprinkled through the content, rather than just at the start and end of it. This means that, if you can do it without reducing the quality of your content, striving for videos that are at least ten-minutes long is a good way to increase your CPM. But again, remember, having the ads there only benefits you if viewers are watching the ads.
If you needlessly extend your content without adding anything of value, it is highly likely that your viewers will switch off before ever seeing the extra ads you have gained.
It is also worth noting that having longer videos might be better for your CPM on individual videos but not necessarily the best option for your channel as a whole. It may be that your content is better suited to being broken up into smaller chunks, rather than lumped into one almighty video. If this is the case for you, don’t be afraid to do so. Having four ads in a ten-minute video will likely lead to a lower CPM compared to twelve ads in an hour-long video, but all of your content will still get watched, and you may find that you get more views overall when it is delivered in more digestible shorter videos.
The next factor to consider is the content itself. Despite YouTube’s sometimes carpet-bomb approach to categorising content as monetisable, there is still nuance to the system, and advertisers can choose to opt-out of certain types of content. If your content leans into the controversial—such as political or religious—you may find your CPM being much lower—even non-existent—due to advertisers shying away from marketing their brand around those topics.
And, as we have established, the fewer advertisers there are fighting for spots on your content, the less your content is worth.
How to Boost Your CPM
The most obvious way to boost your CPM on YouTube is to take heed of the things we mentioned above. Try to make your videos at least ten-minutes in length without sacrificing the quality of your content! Overall, you want to be aiming for more watch time across the entirety of your videos, and you can’t achieve that by just making them longer without maintaining the quality of the videos.
I you want a deep dive guide into how I boosted my YouTube CPM by 500% in 3 months I have a blog where I step you through my strategy.
Also, try to drill down into your niche as much as possible. The more your content is directed towards a specific market, the more valuable it will be to advertisers in that market. Again, we are talking minor tweaks to your existing content. If you have to change your channel significantly to achieve this, you should put serious thought into whether the pay off is worth the effort.
There are other ways to boost your effective CPM, however. We have been focusing on the YouTube Partner Programme and the money you can earn through YouTube directly. This is typically what people mean when they talk about YouTube CPM, but, if you adopt a looser definition of what makes up your CPM, you can employ other means to get that number up.
For example, if you strike a sponsorship or brand deal, the money earned from those deals can be directly divided by the views you got on the associated videos and added to your CPM total. Another example of how you can boost your CPM from outside of YouTube is through affiliate programs—where you can do it organically, of course. Affiliate programs allow you to leverage related products and services, essentially earning a commission on sales generated through your platform.
There are also options like subscription platforms such as Patreon, and any other way in which you earn revenue as a direct result of your channel’s success. Your effective CPM is the total revenue you make from your YouTube channel through all avenues divided by thousands of views those videos received during that time.
Does YouTube Take a Cut of my CPM?
Going back to the pure YouTube CPM, you might be wondering if YouTube takes a slice of that pie.
The answer is, of course, yes; YouTube has to make money somehow. YouTube’s share (45%, if you were wondering) is not factored in before your CPM figure is calculated.
So, if you were making a CPM of around $10 (which would be quite high, by the way), you would actually be receiving around $5.5 of that $10. This is obviously not an ideal metric, but if you want a more accurate snapshot of your channels earning, you’ll want to take a look at RPM.
What Viewer Behaviours Generate More Revenue?
Other than the differing values of ads in different niches, there are also different types of ads that YouTube display and the way your viewers interact (or don’t) with them will change how much you earn. For example, there are short unskippable ads that the viewer has no choice in watching if they want to watch the content. For these ads, you are paid per thousand views. For the longer skippable ads, the viewer will need to watch at least thirty seconds of the ad to count as an engagement.
There are also overlay ads, which are small banner ads that are displayed at the bottom of your video. These ads only earn you revenue when your viewers click them.
Finally, there are display ads which show up beside your video and can earn revenue per click or per thousand views depending on what the advertiser decides when they set their advertising campaign up.
It is very important to bear this in mind when thinking about your potential revenue because your audience’s interest in products and services that might be advertised on your channel will significantly affect your CPM. If you are making videos on a specific type of product and people are coming to your channel before making purchasing decisions, there is a much higher chance they will be enticed by the ads displayed on your content.
Following on from that last point, if you are starting a YouTube channel with the primary goal of making money, you should put serious thought into the niche you go into. As a general rule, the more general and broad your audience is, the less valuable it is in terms of advertising revenue.
To expand on the above example, consider a channel that makes videos reviewing the latest phones. People who come to that channel are likely interested in buying the phones that are being reviewed, and so the advertisements displaying on your content will be more likely to offer products and services around those phones. This is an example of a good niche as far as CPM potential goes since the advertisers can be relatively confident that the audience they are advertising to will be interested in their products.
On the other end of the scale, consider a channel that makes funny videos and has a large and diverse audience. They are undoubtedly successful as a YouTuber, but there is no common theme across their audience from a consumer purchasing perspective. Everyone is there to see amusing videos, and there is no reason to believe they would be interested in a specific product or service just because they are watching this channel.
This is not to say that channels like this can’t be very financially successful, of course, but a channel with a clear niche will often pull off a considerably higher CPM than a channel with general appeal.
While a high CPM is probably the most accurate single metric of success on YouTube, it is important to remember that it is not the only metric, and you should not focus on CPM at the expense of all other aspects of your YouTube channel.