AdSense CPM Rates Explained: What Smart Publishers Do Differently?

Ad placement, content quality, and niche are some of the many factors that can cause a rise or dip in your AdSense CPM rates, affecting your AdSense earnings. This blog breaks down how these factors influence ad revenue, so that you can optimize your ad strategy and make smarter decisions for better monetization. 

For many publishers, the journey of monetization often begins with AdSense. It is a first step that carries the website towards the monetization journey by connecting publishers with advertisers and enabling a direct path towards ad revenue. According to trends.builtwith.com, over 90 million websites are using Google AdSense globally, which clearly indicates the widespread adoption and dominant force of Google AdSense in ad monetization for publishers worldwide.

In this blog, we’ll explore what Google AdSense CPM is, how to calculate CPM using RPM, types of AdSense Ad units and what affects CPM rates. 

What is Google AdSense CPM?

In Google AdSense, CPM refers to Cost Per Mille or Cost Per Thousand Impressions. CPM is a pricing model where a publisher is paid for every 1000 impressions of an ad on their website by advertisers, regardless of whether a user clicks on it. It’s a way publishers earn ad revenue based on the number of ad impressions. 

CPM is the most common metric that helps both advertisers and publishers track ad performance. AdSense provides an extensive dashboard where, as a publisher, you can track ad performance using impression RPM (Page Revenue per Mille), which is essentially eCPM (Effective Cost per Mille)

Google AdSense uses four types of Bids for ads, i.e. CPC (Cost-Per-Click), CPM (Cost-Per-Mille), Active View CPM, and CPE (Cost-Per-Engagement). These bid types reflect the way an advertiser would like to pay for the ads that they want to display on a publisher’s website. Let’s quickly give a rundown on what each bid type represents:

• Cost-Per-Click (CPC): The Publisher gets paid only when a user clicks on the ad.
• Cost-Per-Mille (CPM): Publisher gets paid for every 1000 impressions (Impressions =  times an ad is shown)
• Active View CPM: Similar to CPM, publisher gets paid for impressions that are actively seen by the user.
• Cost-Per-Engagement (CPE): Publishers get paid only when a user engages with the ad, such as playing the game ad or hovering over it. 
• Note:  AdSense converts all the bids to a common metric called eCPM (estimated CPM) before the auction.

As a publisher, it is very crucial to understand how to calculate AdSense CPM using various methods. Let’s learn how you can calculate AdSense CPM using the RPM metric.

How to calculate AdSense CPM using RPM metric?

This question has puzzled many publishers. Turning RPM into CPM is not that technical. You can use a simple method to change your RPM into CPM. How? Let’s check it out:

For instance:

You’re earning an RPM of $12, and your page has 4 ad units. That means for every 1,000 pageviews, you’re serving 4,000 ad impressions* and earning $12 as ad revenue.

*(1,000 pageviews × 4 ad units = 4,000 ad impressions)

Now, you earned $12 from 4,000 ad impressions. So what’s the CPM?

Let’s solve it:

4,000 ads = $12  

1,000 ads = 12 / 4 = $3  

Your CPM = $3

That’s it. RPM gives you revenue per 1,000 pageviews, while CPM tells you revenue per 1,000 ad impressions. So knowing how many ads appear per page makes the conversion super easy. 

Now that we are well-versed in how to calculate AdSense RPM, the next step is to explore the types of ad units that help generate those impressions.

5 Types of AdSense Ad Units

Google AdSense’s main motive is to make ads more engaging for users and more rewarding for publishers, and for this very reason, Google’s always cooking up new ways to get traction from all three stakeholders of programmatic advertising, i.e. user, publisher and advertisers. From classic formats to smart user-friendly ad designs, every ad unit’s main aim is to catch user attention and make the campaign a success for the publisher as well as advertisers. Let’s explore what types of ad units Google AdSense offers:

1. Display Ads:

Most common ad unit, display ads are a versatile and flexible banner ad that can appear anywhere on the website, i.e. header, sidebar, or in between content, offering definite reach and viewability. They are completely customizable and responsive by default; in other words, they can adjust how they appear on the website on the basis of the device that is being used.

2. Search Ads:

Whenever a user searches for something, these ads appear and deliver super-relevant search results. Since users are already searching for something specific, search ads provide better engagement, more clicks and more traction from users. 

3. In-Feed Ads

Designed to match the look and feel of the platform, in-feed ads blend seamlessly with listicles or feed-style content (for example, news articles, product listings, etc.) They are native in style as they blend perfectly with the content and drive more viewability than other banner ads.

4. In article ads:

The main goal of in-article ads is to cause minimal distraction and drive maximum revenue. They blend in perfectly, just like in-feed ads, but in-article ads, as the name suggests, are placed between the paragraphs of an article. Websites that offer long-form content can surely use these ads to maintain their user engagement and ad revenue at the same time. 

5. Multiplex ads

New in town, multiplex ads are like content suggestions but for ads. Multiplex ads show a grid of ad choices to the user to offer them an option to choose the ad based on their interest. If your website is content-heavy, Multiplex ads give a sense of choice to the user without being too pushy.

How AdSense CPM Rates are Decided

Factors that Affect AdSense CPM Rates (long version)

It’s easy to explain away CPM rates using second-price auction dynamics, and while that is a valid explanation, it’s not the whole story—only part of the picture. How do buyers decide how much to bid? And why do some publishers generate as much as $50 CPM while others can barely touch $3? Here are some of the factors that decide how much you can earn.

Geography

English-speaking countries tend to have higher CPM rates compared to non-English speaking countries. Apart from that, the average CPM also depends on the spending power of the people in a country and how developed the online advertising industry is in those countries.

Cookie data

Advertisers bid more when they are confident that a user will convert. And the cookie trail created by a user as they browse through a website helps provide the data for better ad targeting. For instance, cookie data might show that the user has an affinity for technology.

Device types

Even though mobile internet usage has surpassed desktops in recent times, when it comes to CPM rates, desktops still earn top dollar. This is because small screen sizes and slower network speeds on mobiles and tablets lead to lower conversion rates compared to desktop.

Niche / topic

Having a well-defined niche encourages buyers to bid higher in auctions because they know the users will be more likely to convert. This is why a website that focuses on a particular topic (such as health, finance, technology) will generate greater CPM than a generic website.

Purchase intent

The stage that website users are within their buyer’s journey also affects earnings. Buyers will bid higher if they know that the user is about to make a purchase. Therefore, a website that reviews or compares products will have higher CPM rates than say, a news website.

Website quality

Some buyers place a lot of emphasis on where their ads appear. As more and more brands start taking brand safety into account, publishers who have a website with good user experience and brand safe content stand to earn more than publishers who don’t take that into account.

Ad sizes

The choice of ad formats has a significant impact on bids and publishers will do well to capitalize on that knowledge. Generally speaking, larger ad units command higher CPMs. In addition, some popular ad sizes have greater demand than others, such as 720×90 (leaderboard), 300×600 (half page), 320×100 (large mobile banner), 300×250 and 336×280 (squares).

Ad viewability

Viewability is an important metric for advertisers, especially when they know they are bidding for impressions. Google defines viewable impressions as, “when at least 50% of the ad is displayed on-screen for at least one second.” A low viewability score will make CPMs plummet.

Past performance

Most big advertisers use demand-side platforms and analytics tools to measure ad performance, this is not shooting in the dark—they know about the quality of traffic and click performance coming from the publishers they work with. When advertisers get good return on their investment, they are more likely to bid higher in future auctions.

Number of ad units

A lot of publishers think that adding more ad units is always good. That’s not accurate, even though your revenue might increase by adding units, the impression-level AdSense CPM rates will decline due to a shift in supply/demand dynamics during the auction and user attention splitting between units. Don’t assume that adding more ad units is the solution. Run an experiment instead.

Clickthrough Rate (CTR)

In case of buyers who pay for clicks instead of impressions, RPM is a function of CTR and CPC, so the payout depends on how many ads were clicked along with revenue generated per click on average, making CTR an important factor when it comes to determining AdSense revenue.

Seasonality

Most publishers are familiar with the January CPM slump, which is a drop in CPM rates. It happens because advertisers are busy planning ad campaigns for the coming quarter and year. Seasonality varies by country, event (Black Friday, Cyber Monday, etc.), and time of the year (travel sites earn more towards the end of the year).

Key Takeaways: Quick Summary

• CPM is a crucial metric for both advertisers and publishers to track ad performance and revenue generation based on impressions. Publishers get paid for every 1,000 times an ad is displayed (an impression) on their website, regardless of clicks.
• AdSense converts all advertiser bids (CPC, CPM, Active View CPM, CPE) into a common eCPM metric. It happens before the ad auction, to make it more effective
• Page RPM is your estimated earnings per 1,000 page views. Ad CPM (or effective CPM) is your earnings per 1,000 ad impressions. To calculate your effective Ad CPM, divide your Page RPM by the average number of ad units.
• AdSense offers a range of ad units designed for different placements and user experiences (Display, In-Feed, In-Article, Multiplex ads, etc. 
• AdSense uses a second-price auction model, meaning the highest bidder pays just one cent more than the second-highest bid.
• CPM rates are primarily determined by what advertisers are willing to pay for an impression. Crucially, the number of advertisers willing to pay that price for your specific audience and inventory.
• AdSense CPM is influenced by many factors, including site quality, ad size, viewability, past performance, ad unit count, CTR, and yearly seasonality in ad spending.

Frequently Asked Questions

Harleen Kaur

Harleen has a knack for attention to detail and a solid grasp of the ad tech industry. She simplifies the complex world of ad tech, making it accessible and fun through her content that stands out from technical jargon. Her in-depth articles, insightful analysis, and engaging content resonate with audiences and keep them informed.