What is CPM
CPM is an abbreviation of Cost Per Mille, also called cost per thousand (CPT). CPM and CPT are commonly used as a benchmarking metric in the advertising industry. CPM is often used for media with countable views such as advertisements bought on radio, TV, print or YouTube where advertisements can be purchased on the basis of showing the ad to 1000 viewers.
YouTube creators are able to monetize their videos by placing ads before their video, during the video or placed next to the video on the page. Youtube creators do not have to worry about looking for advertisers and negotiating CPM rates because YouTube will do that for you. In turn YouTube keeps a percentage of what the advertisers pays which means CPM can differ from the amount the YouTuber earns.
What is RPM and eCPM
CPM is the cost that the advertiser pays. Because YouTube keeps a percentage YouTube creators do not get the full amount a advertiser pays. There can be a big difference between the YouTube CPM and the amount of money a YouTube Creator earns. The metric for creators is RPM or eCPM. RPM stands for Revenue Per Mille while eCPM stands for Effective Cost Per Mille and is the term YouTube uses to describe the creators’ earnings per thousand views.
How to Calculate CPM
To calculate the CPM we use the formula: (Advertising cost ($) / Total Impressions) x 1000.
- An advertiser pays $100 to YouTube for running their advertisement
- YouTube shows the ad to 10.000 people (thus 10.000 impressions)
- We divide the total advertising cost by the amount of impressions: ($100/10.000) = $0.01 per 1 view
- We know the cost per view but need to multiple that by 1000 to get the CPM: $0.01 x 1000 = $10 CPM
Average YouTube CPM
Calculating the average YouTube CPM is very difficult for multiple reasons.
First of all because a lot of YouTube creators believe they are not allowed to disclose their actual earnings. Wether thats true or not has been a long standing point of debate. A good example of this is fitness YouTuber Brandon Campbell, Brandon has been disclosing his earnings in his yearly video. He has done so since 2014 and is still a participant in the YouTube partnership program while other YouTuber still claim that they are not allowed to disclose their earnings.
And secondly because the YouTube CPM can differ a lot based on a variety of factors. For example the demographics (age, gender, location and others) of your audience plays a big role in how much you get paid per 1000 views but also what type of ad you are showing to your audience. A 30 second pre roll ad that can not be skipped will make your money than less invasive ads.
Generally YouTube creators have a RPM of $0.50-$5.00. That is a very wide range but unfortunately it is as accurate as possible without giving false information.
Your YouTube CPM is usually a lot lower in January. This happens because most advertisers have spent a lot of money on running their ads during the holidays in November and December. January is a month without any holidays to capitalize on and a month where a lot of advertisers are still figuring out their ad budget for the new year. Usually your CPM will increase to normal levels around Valentine’s Day.
How to Increase YouTube CPM
Because the amount of YouTube channels and videos has grown exponentially the past few years there have also been a lot more channels who are trying to monetize their content. This means there is a lot of advertisement space YouTube can sell to advertisers while the amount of advertisers has not grown at the same rate. This means that there is a lot of supply while the demand hasn’t kept up which is why the YouTube CPM has gone down significantly the past few years.
For YouTube creators this means that they are getting paid less while still getting the same amount of views. Many YouTubers have decided to generate other income streams selling their own products and services to grow their income and be less depended on YouTube’s CPM.
To increase your RPM you can bypass YouTube and contact advertisers directly to sell advertising space in your videos. This will increase your RPM but will also require a lot more work because you need to find advertisers and discuss terms and conditions yourself. This will allow you to keep 100% of the amount an advertiser pays.
Another way to increase your eCPM on YouTube is by covering topics where there are a lot of advertisers but not a lot of videos that offer ad space (low supply, high demand). This is very difficult to estimate so you need to do a lot of research to see what your opportunities are.
Alternatives to CPM
As we discussed Youtube’s CPM has decreased by a lot the past few years. That’s why a lot of YouTube creators are looking for alternatives to be less dependent on YouTube. We also highly recommend building alternative income streams around your YouTube channel. If YouTube decides to further decrease your CPM, or if you are ever banned from their partnership program you won’t lose your entire income.
There are a lot of ways to build alternative income streams from your YouTube channel but here are a few:
- Sell products: find products related to the topics you cover on your channel and launch your own product line or sell your own fan merchandise.
- Affiliate marketing: partner up with companies in your niche and discuss a commission for everyone you refer to their product or service
- Sell services: sell services related to the topics you cover in your videos. For example a fitness youtuber can sell online personal training guidance.
- Branded content: a lot of companies will pay you and/or send you free products if you show and use them in your videos and recommend them to your audience.
We also recommend getting your YouTube subscribers to follow you on social media or subscribe to your e-mail list. If you ever lose access to your account you can still communicate with your fans.