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The Basics

CPM stands for cost per thousand. Media is often bought by the number of thousands of impressions. Please keep in mind, media rates are almost always highly negotiable.

The Specifics

Borrowed from:

Online Media: Is the Price Right?
Jim Meskauskas

Back in the good old days it was a common occurrence for publishers to issue rate cards for their online inventory, distribute them to online planners and buyers, and have those planners and buyers laugh their asses off when they caught a glimpse at the CPMs being asked for.

Though there are far more web sites accepting advertising today than there were a year ago - and certainly more than there were five years ago, when I started in this business - back in those old days there was still a lot more advertising supply than there was demand.

Negotiating online buys was like shopping at a Mexican public market. The salesman quoted a price, you wrinkled your nose. He quoted a lower price, you furrowed your brow. He said, "OK, for you, how about this price?" and you, feigning indifference, turned to walk away. He stopped you by saying, "OK, OK! How about this?" He quoted you his final price, and it was extraordinarily low - perhaps just a fraction of the originally published rate card CPM.

Well, this negotiating tactic still works. But the final negotiated rates don't look like they used to.

The two price structures that almost all site buys are based on are CPM (cost per thousand impressions) and CPC (cost per click). Regardless of efforts made on the part of advertisers to put together only pay-for-performance ad buys (cost per download, evaluation, registration, or sale), the CPM and CPC models still reign supreme. That isn't to say there aren't plenty of examples of pay-for-performance models of the type mentioned in the above parenthesis, but these usually are components of a business development or affiliate program, with publishers being compensated via bounty or revenue share.

So, where do we find CPMs and CPCs at these days? What kinds of rates should buyers expect to find out there when negotiating media on behalf of their clients?

Well, it varies by category of site, to be sure, and it is different for CPM versus CPC pricing.

For CPC buys, the market has really remained relatively stable, and in some cases, we have even seen CPCs go down. CPC networks like ValueClick and eAds have shown slight increases over time, as high as $.45, for example, on Valueclick. Advertising.com, formerly Teknosurf, offers even lower run-of-network (RON) CPCs.

On specific sites that will offer CPC in addition to CPM buys, CPCs usually run between $.25 and $.50. Though they can be as low at $.10 (for higher cash outlays) or as much as $1 (for high-demand properties like tech sites).

With CPMs, there is more variety and thus more negotiating opportunities.

AdKnowledge 1999 Advertising Report reported that the average CPM is a hair above $33, and increased over the year before. Now, this is far more than the average CPM I see on most buys that our agency puts together, but CPMs are definitely holding firmer on more sites than they used to.

When buying on technology sites, there is little room for negotiation. Demand has been, and continues to be, very high for these sites. They do not have to negotiate much with you because they can usually sell out their inventory without offering price breaks.

That isn't to say there isn't some room for negotiation, but if there is, it is usually borne of a promise of a big-dollar buy. In this sector, look for CPMs to be as high as $100 (though I would never pay it, that's what's out there). CNET has CPMs this high, though you can buy on some of their other properties for as low as $25-$30. ZDNet is similarly priced, though I've found them more amenable to working deals if the minimum monthly outlay of cash is significant. By that I mean well over $10K.

Women's sites are also notorious for not negotiating much. With $10,000 and $20,000 minimum monthly buys, the CPMs are usually held at $35 to $40. Raise that monthly minimum, and the CPM might come down a few bucks. The sites I'm talking about here are Women.com, iVillage, and the CondeNet properties like Swoon or Epicurious.

If you want to buy somewhere other than on the "famous" sites, there are plenty of others out there where you can get $20 CPMs. Check with the ad networks first for these kinds of sites. You might be surprised what deal you can work. The CPMs might get lower than that $20.

Portals and search engines have a wide variety of CPMs. Keywords can go from as little as $30 on some of the lesser-known search engines to as high as $60 (even higher if you want exclusivity). Category or subject placements can be around $30 to $40, though I wouldn't really recommend paying more than $20. I'd never pay more than $5 for ROS (run of site). Truth be told, rarely does a portal/search engine ROS pay out even at that rate.

Community sites remain a bargain. Though in my experience they still don't pay out very often, they are too good a deal NOT to test. I've seen CPMs as low as $5. Some community sites like GeoCities, ever since being bought by Yahoo!, don't even come close to that anymore. They try to push that inventory at something like $15-$20 CPMs, but I wouldn't touch that with a ten-foot cattle prod. Look for community site inventory targeted by content affinity (the "neighborhood") to be around $8-$12 CPMs.

The financial category is an interesting one when it comes to CPMs. As with women's sites, "Tier I" sites can have pretty high CPMs, around $40-$60. The problem with the category, however, is that there are lots of sites outside of "Tier I" that don't cost anywhere near that. The other problem with these kinds of sites is that they are stickier than most, making it harder for their high CPMs to pay out for a client interested in a cost-per-acquisition metric.

There are a lot more categories of sites than covered here, of course, but hopefully this is helpful is setting price expectations.

In general, negotiating down CPMs is still very possible, often by as much as 50 percent of published rate card. But expect it not to be quite as easy as it was. Look for publishers to stick more closely to their rate cards when negotiations first get started. Also, look for more and more publishers to associate lower CPMs with higher out-of-pocket. This means you might get the CPM price break you were looking for, but it's going to take a higher monthly dollar total. This is because although there is still more supply than demand, there is less "desirable supply" than there is supply in general.

Ultimately, the buy you make for the advertiser is going to be tied to some performance metric, and if it pays out against a high CPM, it pays out and everyone should be happy. But each and every time you go out there to buy inventory, always look for a lower CPM... even if the last ten times you looked into buying on the site you didn't get it. Negotiating never ends, and you never know when you are going to get what you ask for.

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