Is CPM Bidding a Waste of Your Money?

Yes.  Full stop.

Answering that question and then calling it a day doesn’t make for a rewarding blog post, though.  I have found reasons that allow you to say CPM bidding wastes your money, and there are also some cool insights I’ve found about two of the biggest categories on the Google Display Network.  So even though my titular question has already been answered, please read on to find out exactly how CPM bidding wastes your money.

Like us, you may have thought it was a waste previously.  Also like us, you may have wanted some data to back that up.  Within the walls of Hanapin I asked around and found that no one had used it before (since we are all so direct response oriented).  It was time to experiment! After concluding a lengthy (albeit small) test with Google’s CPM bidding option, I’ve found that CPM bidding fails the smell test in pretty much every metric I could think of.

First, a quick explanation of CPM bidding: CPM stands for cost-per-thousand impressions (I’m almost positive they’re using mil {which is any number of romance languages for “thousand”} in case you’re wondering where the “M” comes from).  Your CPM bid is how much you’re willing to pay for a set of 1,000 impressions on the Display Network.

Google says that CPM bidding is best “for advertisers who are focused on brand awareness.”  For people who want “sales or website traffic” they helpfully point out that CPC bidding “might be a better option.”  Might it, dear Google?  Might it?

Both personally and professionally, my mind boggles at the thought of these mythical advertisers who are interested merely in brand awareness.  I’m sure there are a couple out there, but all of my clients, all of my hypothetical clients and even all of my hypothetical hypotheticals would follow a model where they want some sort of interaction based on their advertising.  If that wasn’t the case I would just recommend that I buy them an ice cream truck and drive it around shouting their name through the PA system (this has the added bonus of free ice cream for me).  Someone’s bound to hear that, right?  It’s branding! (Further note: even if this stupid ice cream truck were a business of mine, I still would want my advertising to be “sales or website traffic” focused, thereby proving my earlier statement about hypothetical hypotheticals.)

Putting aside all of my internal concerns about the logic of “brand awareness,” CPM bidding has some potential – maybe it’ll give you access to sites you wouldn’t normally get with your traditional CPC bids or maybe your CTR will be so good on CPM bidding that you’ll be able to save some money on clicks.  Based on my (again, small) experiment, this just isn’t the case.  On to the numbers!

Cost Per Thousand Impressions Performance

So over the same amount of time, here’s what gains you can expect CPM to get you:

-More impressions

-Cheaper CPM

Here’s where it will hurt you:

-Click volume

-Click through rate (I used the same ads throughout the whole experiment, so it can’t be blamed on ad testing)

-Cost per click

View Through Conversions

That last one is probably the most damning one of all.  If the point of CPM bidding is to get your ad out there, then why do all of those increased impressions actually decrease your view through conversions?  I recognize that view through conversions aren’t a perfect metric, but they’re still an indicator as to whether or not your ads are at least in the proper range of users you want to attract.

I’ve heard arguments that CPM bidding allows you to get on better web sites that normally wouldn’t show your ad.  The argument basically boils down to higher site quality or at least higher quality placements in general.  (I wanted to consider CPM bidding from all of its angles before giving it the headline of doom.) **SPOILER ALERT** This argument is also false.

By looking at category performance over the time frame of my test I was able to see how AdPlanner 1000 sites did against non-AdPlanner 1000 sites (just by subtracting out non-AdPlanner category statistics from the overall numbers), since these are theoretically high-traffic sites that can do a lot of branding for you.

AdPlanner 1000 Performance with CPM Bidding

Key takeaways from here:

-AdPlanner 1000 actually has a lower percentage of the impressions on CPM bidding (91.4% AdPlanner sites on CPM bidding vs. 96.7% AdPlanner sites on CPC bidding)

-Non-AdPlanner traffic has a much higher CTR for both campaigns (although the 3.33% CTR during the CPC bidding phase of the experiment is disconcertingly high and warrants further investigation)

-The actual CPM of AdPlanner sites is a lot cheaper with CPC bidding

-View Through Conversions are drastically better with CPC bidding, even more so when you look at that stat per 1000 impressions (labeled in the chart as View Through/Impression)

So, the whole “quality of site” argument surrounding CPM bidding was put to bed, but there was also one more category that I took a look at specifically: whether or not the ad was above or below the fold (basically, the quality of your impression).  Again, you’d expect (or at least I expected) CPM bidding to have a higher percentage of impressions above the fold.  You’re bidding on visibility, after all.

CPM Bidding Above/Below the Fold

First off, as with the AdPlanner breakdown, the impressions that are theoretically more valuable (above the fold) don’t perform as well.  That holds true across both CPC and CPM campaigns – CTR and View Through Conversions are both a lot better below the fold.  (It’s a shame that you can’t track performance by site within each of these categories.  It’d be great to see which sites on your placement reports are above or below the fold.)

In any case, here are the main items that I took away from the data:

-Actual CPM (for either CPC or CPM bidding) is cheaper with impressions above the fold.  It’d be great to see the quality of those sites, but I don’t know of a way to do that.  (You can only exclude categories at the campaign level, and it seems like a bit of overkill to have one campaign for above and below in addition to another campaign with the same targeting that only targets above the fold placements.  That’d be tough to manage.)

-Impressions below the fold do a lot more in terms of view through conversions.  Another mystery that I’d love to solve some day is what percentage of those impressions involved someone scrolling down to your ad.  “Below the fold” can be way, way down the page depending on the site, so I’m very curious as to what percentage of users really scrolled down that far.  The high preponderance of impressions to view throughs could also just mean that the sites that have below the fold placements are more relevant to whatever I was pushing online during this experiment.

-CPM bidding does not buy you a higher percentage of impressions above the fold.  CPC bidding got 97.7% above the fold.  And while the crazy CTR of the below the fold placements may account for so few impressions there, I still think that it shows CPM bidding isn’t going to get you a more visible spot online, even though its purpose is one of branding.

So, the stats are worse, the sites are of lower quality on average and the placement on those sites is also of lower quality.  I think I’ve proved why CPM bidding wastes your money.

Has anyone seen anything different?  It’s always been a scary idea to us here at PPC Hero, and this isn’t doing it any favors.  Who wants to speak for CPM bidding?  It won’t speak for itself (it’s too busy wasting your money {Ba-zing!}).