ROI Calculator from video advertising how to set cpm

When you add video advertising to your videos you are selling advertising space to a brand. Your CPM reflects how much that video space is worth. Choose an ad network which will let you set a minimum CPM, that way you’ll have much more control over how much revenue you earn.

What is CPM?

CPM stands for Cost per Thousand Impressions. It is the amount of revenue you will earn for every thousand views of the video advert. The higher the views, the higher the revenue.

Most video advertising platforms will allow you to set a target CPM for your video inventory, i.e. how much you want to charge brands to advertise on your videos.

How do you determine your minimum CPM?

It all boils down to how much return you want to get from your video investment. How much did your video cost to produce? You need to be earning at least this much before you’ll generate a return.

Let’s say your video cost $100 to make. You’re running a 2-month campaign and you’re expecting 10 thousand video views each month, for a total of 20 thousand views across the campaign.

Simply divide your number of views by a thousand (so in this case 20) and then divide the amount of revenue you wish to generate by that number. In this example, 100 divided by 20 gives you a CPM of $5. For every thousand views, you earn $5. After 20 thousand you’ve got your money back.

[Amount of revenue you want to generate]

[No. of views/1000]

Of course in the real world, things are slightly more complex. Bear in mind that even though you may set your CPM as $5 (or however much you choose), this does not guarantee you’ll earn $5 for every thousand views. It comes down to an auction.

Brands will bid a certain amount to advertise on your videos and the brand with the highest bid wins. The amount they actually pay is determined by the amount the brand who came in second would have paid. For example, Brand A bids $2 and Brand B bids $4. Brand B wins and pays $2.01.

To generate more revenue from your ads you may be tempted to just increase your minimum CPM. But, make sure the CPM you set is realistic and there are brands willing to pay that much for your video inventory. It’s all about establishing a balance between how much revenue you want to generate vs. how much brands are willing to pay for your video real estate.

In the example above, for instance, you may wonder why you shouldn’t set your CPM threshold to more like $10 to earn even more money. But, by blocking any brands who are bidding less than this $10 mark you’ll likely miss out on a lot of potential buyers. Keep a watchful eye on your fill rates. If fill rates drop as you increase your CPM you may wish to drop it back down again. Consider, instead, ways to increase your video views. That way you can keep CPMs at a competitive level, while still generating a fantastic return. We can work with you to help with this.

Maximize fill rates & drive higher CPMs

vzaar has partnered with AOL to bring publishers a fantastically easy way to unlock video advertising revenue. AOL’s unique One Video Demand Side Platform means that we have unique demand that our publishers can benefit from.

Publishers plug their inventory into AOL’s open exchange which is great for fill and volume but also set up Private Marketplaces, which drive higher CPMs. For more information book a call with one of our video experts today!

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