What would be a reasonable price for a CPM ad?

What ad publishers use CPM and what use CPC?

• I'm not talking about ad "networks"; I'm interested in websites that actually publish ads. My rough belief is that search websites like http://google.com use mainly CPC and newspaper websites like http://nytimes.com use mainly CPM for charging ads. It seems also true that payment methods are quite flexible, so clients could choose whenever possible. Could you give me some famous names that use CPM and CPC? I tried several websites like Google, NYTimes, CNN, ESPN, ... to figure out if they use CPM or CPC, but they only directed me to "Contact Sales Team" links.

• Answer:

  You are right in stating that traditional media outlets mostly charge CPM. These companies often find their origins in print publishing where you always paid for the number of eyeballs as it was very difficult to guess anything else. There are a few reasons why many companies tend to hold on to CPM. The first, as I mentioned, is legacy. The second is fear of losing margins: when you recalculate a CPM deal to the respective CPC value you will often see that you've made an expensive deal. The third reason is that most CPM sellers are selling more branding themed ads than actionable ads. Buyers for branding ads are looking for impact (lots of impressions on a short period of time) and thus a volume discount on their purchases. And this is easier to do with a CPM model. What's important to note however is that in the end you are almost always paying CPM, even if you are bidding CPC/ Let me explain for a Google Adwords ad. The formula to decide whether and where your ad is shown is: ad rank = CPC bid x quality score quality score: CTR (relative click-through-rate & relevancy) To remove complexity, let's assume that the relevancy (ad relevancy, landingpage relevancy) is the same for all players. Now let's check for three players which one will get the top position:                           CPC bid                   ad CTR           ad position Ad 1                   $1,00                        5,00%             2 Ad 2                   $1,00                        4,20%             3 Ad 3                   $0,80                        8,00%             1 So why is it that the thirds ad, which has the lowest CPC bid, will still get the highest position? It's simply because Google earns more from that ad as more people are likely to click on it. Why again? Let's assume Google has only place for one ad and 1000 people to show it to. If they show ad 1, they will earn 1000 impressions x 5,00% CTR x $1,00 which makes total earning of $50. For ad 2 this is 1000 x 4,50% x $1,00 which makes $45. But ad 3 earns 1000 x 8,00% x $0,80 = $64. So Google earns most money on the third ad. Just as the pricing for the other companies, this means that Google is also pricing based on maximizing the value for the limited number of people who will see the ads. While you pay CPC, you're really still paying CPM. There is one big difference however: incentive to offer the most relevant content for the customer. Within a CPM model you are charged on eyeballs, so the relevancy of your ad doesn't matter that much. With a CPC model, your media outlet (Google, NYTimes, ...) has the incentive to show your ad to the people who are most likely to interact with your ad. And this is why any actionable cost-model will still outperform the more vague models.