Target CPM – What Is It and Does It Increase Ad Revenue?

Updated on: February 17, 2024
Ensure you receive the appropriate amount for each impression, maximizing the ad revenue potential.


Whether it is about display or video ads, the floor price has been a vital tool for digital publishers to ensure that their ad impressions haven’t been bought at lower than the market value.

Publishers are always looking for strategies to sell to their advertisers optimally. Since hard floor prices (fixed CPMs) limited the demand for ad impressions from potential advertisers, publishers had to avoid either setting up higher floor prices to capture more demand and ensure a high fill rate or setting up high floor prices to sell ad inventories at premium ad rates and ignore the lower bids (even if they’re marginally lower than the floor price). 

As you can see, publishers must trade between eCPM and fill rate when the floor price stays static. To help, Google developed a ‘target CPM’ feature in its ad server )Google Ad Manager) for publishers to dynamically alter floor prices to capture more bids while maintaining the eCPM at the desired level. Let’s dive into the details and see how you can leverage it. 

What Is the Target CPM (tCPM)?

Target CPM is a dynamic floor price that enables Google Ad Manager (Google DFP) to make floor prices higher or lower to match more bids while preserving your eCPM at the targeted range (hence the name, target CPM). 

According to Google, a floor price on an individual auction can be either higher or lower than the target CPM (tCPM). At the same time, an average CPM is either equal to or higher than the target CPM specified by the publisher. 

Impact of Target CPM on Header Auctions

Most of us know that unified pricing rules centralize the management of target CPM across all the indirect programmatic demand channels. Once target CPMs are enabled, it applies to all non-guaranteed line items – an ad exchange, network, or price priority. To put it another way, you set a common target CPM for all your auction – from exchange bidding to header bidding. 

And what if you are running header bidding (especially on the client side)? We all know that header bidding happens outside Google Ad Manager before sending an ad request.

How does Target CPM Influence Header Auctions?

If you are running header bidding and setting target CPM for your remnant inventories, you must convey the floor prices to header bidding demand partners.

Because bids from partners can be way lower than the target CPM in some cases, and ad servers essentially end up ignoring them. Hence, it is advised to set correlating floor prices for SSPs participating in the header auctions. You can do it via the header wrapper or your SSPs’ dashboards.

How to Set up Target CPM in Google Ad Manager?

  • Go to Inventory > Pricing rules
  • If this is your first time creating a UPR, you must fill in basic details like Name and other targeting criteria.
  • Once done, navigate to Pricing and select Set Target CPMs.

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How to Optimize Target CPM in Google Ad Manager?

Google Ad Manager provides several opportunities for publishers to do A/B testing and optimize their ad revenue. 

You can take the help of the Opportunities feature and understand if your target CPM strategy is going well or not. However, to analyze and optimize the target, a publisher has to run experiments and analyze the data by changing the tCPM value for the inventories. Here’s how you can run experiments on Ad Manager:

  • Go to the Google Ad Manager home page, and click Optimization > Opportunities.
  • Click View Opportunities to select the Opportunity type. Here, select “Enable target CPM on unified pricing rules.” 
  • Then, click the Experiment button to run. Enter a name for the experiment, e.g., Test_t_CPM1. Set the Start Date and End Date for the target CPM experiment.
  • After this, select the % of impressions to allocate the traffic to the experiment. And then click Start Experiment.

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Following the above steps, the Ad Manager runs the experiment for the specified % of traffic for the duration and creates a report that the publishers can analyze.

Publishers can check the impact of new changes on the performance of line items enabled for target CPM. In addition to these manually generated reports, publishers also get weekly suggestions from Google Ad Manager that help them to decide how to optimize the tCPM.

However, to disable the tCPM feature for line items, publishers have to change the settings in Google Ad Manager manually. Also, the ad server automatically adjusts the CPMs; publishers must still analyze and optimize their bid flow and CPM rates and update the value in a fixed time interval. 

Effective Yield Management With Target CPM

As we said, Google automatically alters bids to help publishers get as many impressions as possible using target CPM. But, to get the most out of it, give the ad server enough time (at least 48 hours) to analyze the performance of demand partners (i.e., bid matching rates, average CPMs, etc.). 

In short, the real use of target CPM is not to enhance the ad revenue but to maximize your ad fill rate. Have a question related to it? Leave a comment below.

FAQs

What Is Target CPM? 

The Google CPM metric, Target CPM, allows publishers to adjust ad inventory’s minimum price (CPM) based on the bids the advertisers receive in real-time.

How Does Target CPM Work?

Google Ad Manager adjusts the minimum prices of ad inventory based on individual bid requests. These prices can be either higher or lower than the target CPM specified by the publisher. The objective of the ad server is to maintain an average CPM for your ad inventory that meets or exceeds the target CPM.

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