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

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

Publishers are always looking for strategies to sell to their demand partners optimally. Since hard floor prices (fixed CPMs) limited the demand for ad impressions from potential advertisers, publishers had to either avoid setting up higher floor prices to capture more demand and ensure high fill rate or set 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 could see, publishers have to make a trade-off b/w eCPM and fill rate when the floor price stays static. And, Google came up with target CPM for Google Ad Manager 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 as a publisher. 

Table of Contents

• What is target CPM (tCPM)?
• How target CPM influences the header auctions?
• How to setup target CPM in Google Ad Manager?
• How to Optimize target CPM in Google Ad Manager?
• Conclusion

What is the Target CPM (tCPM)?

Basically, 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) while an average CPM is either equal to or higher than the target CPM specified by the publisher. 

Target CPM Influences on Header Auctions

Most of us are already aware of the fact that unified pricing rules centralized the management of target CPM across all the indirect programmatic demand channels. So, once target CPMs are enabled, it gets applied to all non-guaranteed line items – be it an ad exchange or 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 of Google Ad Manager and even before an ad request has been sent.

How Target CPM Influences Header Auctions?

If you are running header bidding, and if you set target CPM for your remnant inventories, you need to 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 either do it via header wrapper or directly via the SSP dashboards.

How to set up a CPM Target in Google Ad Manager?

Target CPM feature is available for all the Google Ad Manager publishers. As a GAM user, you can set it while creating pricing rules for your ad inventories. With Google transitioning from second-price auction to unified first-price one, the situation is twofold. 

1. Open auction pricing rules.
2. Unified pricing rules (UPR).  

Of course, Google has indeed retired open Auction pricing rules, however, we see publishers still having the open auction pricing rules in place. In fact, Google mentioned that 3% of the Ad Exchange traffic will have a second-price auction for a short span of time and sellers wouldn’t want to leave the traffic without any floor prices. 

So, we’ll see how to set up target CPM via both pricing rules. 

Open auction pricing rule

If you’re able to set up an open auction pricing rule, here’s how to get started.

• Go to Inventory > Ad Exchange rules > Pricing rules. Select the inventory type (i.e. Display, Mobile app, In-stream video or Games) for which you want to define pricing rules.
• Let’s assume you want to create rules for a Display ad inventory. So, click on the New display rule to create new rules for the inventory. Here, name your pricing rule and set its priority order.
• Then, go to the Targeting section on the same page and select the inventories for which targeting will be applied to.

• You can select the pricing rules for a selected advertiser or can apply the rules for everyone. Once you choose the advertisers, select Set target CPMs. Also, DFP allows the publisher to set different target CPMs for different branding types (i.e. Semi-transparent, Anonymous, and Branded).
• After setting the value for target CPMs, click Save.

Unified pricing rules (UPR)

Probably, you’ll be using URP to set target CPM. The steps are quite the same. 

• Go to Inventory > Pricing rules.
• Click New unified pricing rule and name it for reference. 

• Set targeting and in the pricing section, select “Set target CPMs” and Save. 

You might have noticed that there’s also ‘First look pricing’ in the pricing rule page. So, yes, you can set separate pricing rules for first look demand following exactly the same steps. 

Sidenote: If your first look pricing rule and unified pricing rule target the same inventory, the rule with the highest target CPM is applied. 

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. Via Google’s ad server, 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 tCPM value for the inventories. Here’s how you can run experiments on Ad Manager:

1. Go to Google Ad Manager home page, and click on the tab Opportunities.
2. Click View opportunities to select the Opportunity type. Here, select “Enable Target CPM on unified pricing rules”. 
3. 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.
4. After this, select the % of impressions to allocate the traffic to the experiment. And then, click Start experiment.

By following the above steps, the Ad Manager runs the experiment for the specified % of traffic for the duration and creates a report that can be analyzed by the publishers. To extract the report, publishers can go to Report > Experiment and 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 rate.

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

Conclusion

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 (DFP) 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 rather to maximize your ad fill rate. Want to know how you can set it up to maximize header bidding revenue? Reach to us for recommendations.