The High CPM Fear Factor

How do you shop for a good advertising deal? Do you measure the CPM? The scarcity of the competition? Or do you simply throw caution to the wind, buy the traffic and pray to the deities that margins turn profitable?

I think a lot of affiliates gravitate towards self-serve platforms as a matter of security. Once there, they compare CPMs to what they’ve paid in the past. This helps to formulate an idea of value for money. It’s no more than a hunch, but can often be enough to deem a traffic source suitable or unsuitable without spending a penny.

The problem with measuring CPMs in this way is obvious. The equation lacks the mechanical wheel of a clickthrough rate to actually mean something. Without the CTR, there’s truly no way of knowing whether a $10 CPM or a $0.10 CPM is going to do more for your bottom line.

Sounds like common sense, but plays out like anything but.

From my experience, many affiliates have shown themselves to despise high CPMs. They’ll make it clear not only by refusing to work with certain traffic sources, but by refusing to experiment with their bidding strategies on platforms like Facebook and Plentyoffish. Why? Why are affiliates so apprehensive about paying more to potentially get more?

I think many of us share a strain of inferiority complex. We don’t consider ourselves worthy of bidding the absolute top dollar on ad placements, because we somehow believe that our survival nature depends on scraping the barrel and monetizing dregs of traffic that the other real advertisers didn’t want.

Does this sound like your own attitude towards buying ads?

Think about it. When advertising on Facebook, do you have a glass ceiling where you’ve convinced yourself bidding any higher would turn a guaranteed loss? Is that belief backed on solid evidence, or simply a hunch that grew when one campaign slipped in to the red?

I think there’s a fear factor attached to high CPMs. A misplaced belief that in bidding more, we’re losing margin for the sake of a few more eyeballs. You will often find that campaigns can be turned profitable at two ends of the spectrum.

  1. By monetizing the scraps, living off low volume and turning the stragglers in to potential customers.
  2. By bidding the premium, reaching your actual target market and making up for greater costs with an improved conversion rate.

I tend to encourage newbie affiliates to aim for the first target. Without money and/or experience, you should get your tail wet by learning how the system works and trying to turn a profit on the lower quality traffic.

But for established affiliates who have reached the plateau where they make good money but can’t take the next step, stop bidding for the scraps! Grow some balls, place a little faith in your skills and bid where the volume is. There are guaranteed to be a few hiccups along the way, but the future is much brighter when you succeed.

This much is true on Facebook and Plentyoffish, but it’s a damn near prerequisite if you want to enjoy success buying banners through display networks. You’re going to be met with high CPMs. There’s no getting around it.

Some affiliates spend so much time frothing on Facebook Ads that they assume clickthrough rates of 0.08% are an unspoken industry average when moving on to other banner exchanges.

They see a CPM of $5 and think “Shit, I have one click to get the conversion or I’m at a loss. This isn’t going to work.” I remember taking that attitude to a popular gaming ads platform and being pleasantly surprised when my ads jumped from 0.12 to 1.5 CTR, just through the merits of the different platform.

If you’re making the jump from one traffic source to another, leave your expectations of the CPM at the door. You’re going to have to spend money before you have any true perspective. That may strike fear in to some, but it’s a welcome barrier of entry for those who are already reaping the rewards.

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About the author

Finch
Finch

A 29 year old high school dropout (slash academic failure) who sold his soul to make money from the Internet. This blog follows the successes, fuck-ups and ball gags of my career in affiliate marketing.

5 Comments

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  • Well, I have a slightly different issue at hand.
    I was advertising on the G Display Network, paying CPC, and the effective CPM ended up let’s say $1.00

    I’ve decided to approach the placements owners directly for a media buy, and they want $10CPM from me (at the same time getting 0.70 from me on Adsense)…I don’t think it makes sense here?

  • Evaluate success with the same metric that you used to buy traffic with.

    Type/Spend/Revenue/ROI
    CPC / 1$ CPC / 1.10$ eCPC / +10%
    CPM / 20$ CPM / 10$ eCPM / -50%
    CPA / 5$ CPA/ $4 eCPA / -20%

    Do not be scared by high CPMs, I was paying 5$CPM to an email submit and made a good positive ROI. Laser-targeted custom-creative banner traffic.

  • @d3so – True, although some networks seem to dish up very different inventory depending on whether you’re bidding CPM or CPC. Facebook in particular…

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