What Is YouTube CPM? and Why It Matters

What Is YouTube CPM? and Why It Matters

YouTube is one of the most powerful search engines out there. The platform has grown over the years from the days of chocolate rain and cat videos. Now, companies and individuals rely on YouTube to promote their goods or services. This means that there are several opportunities for you on this platform. 

If you have been considering becoming a YouTube creator, now is the time. More advertisers are ready to pay to display ads on your content. But before you get started with YouTube, it would be advisable to discover how you can grow your revenue through CPM. 

Apart from increasing your revenue, CPM is also a powerful tool that will help you pick the right partners as your channel grows. Even if you have been creating YouTube videos for quite some time now, it is still essential to understand how CPM works and how it can increase your revenue.

Today, we’ll be discussing everything you ought to know about CPM and why it matters. 

What is CPM, and How Does it Work?

CPM is short for cost per 1,000 impressions and refers to the amount of money an advertiser pays for every 1,000 impressions on their ads. It varies based on the amount of money the advertiser pays to display the ad on your video. YouTube considers various factors like consistency, bidding price, and the ad type to determine the cost of the ad.

To put it into perspective, if an ad on your video receives 2,000 impressions, and the advertiser is paying $5 to display the ad, you can calculate your CPM by dividing the price by the total impressions and multiply by 1,000. In this case, $5 by 2,000 views amounts 0.0025. Then, multiply 0.0025 by 1000 to calculate the CPA.

CPA or cost per acquisition is the rate YouTube will pay for the ad. Usually, YouTube takes 45% of your total earnings. So, in this case, you will keep 55% which amounts to $1.375. 

There is another type of CPM known as playback-based CPM. In this model, YouTube calculates the amount of money the advertiser will pay for 1,000 video playbacks where the ad is displayed on your video. 

Fortunately, you don’t have to calculate your CPM manually. You can take advantage of various free calculators to determine your CPM for every video. Although the $1.375 made above can seem like a minimal amount, the reality is that it can become a hefty amount after some time if advertisers like your video and use it to promote their business. 

It is best to note that not every impression on YouTube is monetized. The platform will show you the number of monetized views in the YouTube Studio. Check the metric known as estimated monetized playbacks to see the number of monetized impressions. 

So, Why Does CPM Matter?

Whether you have been creating YouTube videos for a considerable time now or just getting started, it is vital to know that CPM is a powerful tool. It can grow your revenue and your channel. This is especially true since monetization is the best way of making money on YouTube. 

Analyzing CPM trends on YouTube can help you choose niches with the highest CPM. However, it is not advisable to focus on the earnings while making your YouTube videos. The secret to increasing your revenue is to build a relationship with your audience. This is not easy, and it might take months and even years. 

It is vital to note that the competition between the advertisers will increase the CPM. It would be best to focus on creating videos that target a keyword with more advertising competition. You can work with a reputable SEO company to discover the most searched keywords on YouTube or Google. 

Another reason why CPM matters is that it can help you identify brands that you can partner with for affiliate marketing. All you must do is identify brands that usually advertise on your videos and reach out to them if you feel that the company aligns with your values and standards. 

Factors that Might Affect Your YouTube CPM

Seasoned YouTubers will tell you that CPMs ffluctuate24/7. Here are some of the factors that can affect your YouTube CPM.

  1. Your Country

Where you live can increase or reduce your CPM. This is because countries have different economies and costs of living. For instance, the cost of living in Kenya is at least 50.16% lower than in the United States. Moreover, Kenyans pay less than 77.78% rent compared with US citizens. This shows that advertisers in the US will pay more to promote their products than in Kenya. 

  1. Your Audience

YouTube categorizes your audience into various groups, namely:

  • 65+ years
  • 55 to 64 years
  • 45 to 54 years 
  • 25-44years
  • 18 to 24 years
  • 13 to 17years 

Each age group has a different income level. For instance, Kenyans in the dependent ages (13 to 17 years) and those supported (65+ years) are less wealthy than the other age group. So how does this affect your CPM? Advertisers are willing to pay more to advertise their ads to paying clients. This means that they are less likely to spend so much on these age groups, resulting in a lower CPM. 

  1. Your Industry

Some YouTube niches attract viewers more than others. Some of the most profitable niches in Kenya include:

  • Fashion and beauty
  • Reality
  • Comedy
  • DIYs
  • Real estate 
  • Fitness
  • Tech reviews
  • Cooking
  • Investing
  • Cars
  • Health
  • Parenting
  1. Seasonality

Seasonality can also affect your AdSense revenue. Usually, DIY, reality, travel, cooking, comedy, tech reviews, and auto reviews channels get more views during the Christmas season.  However, most of these channels experience low views as viewers make new year resolutions, where fitness, real estate, investing, and health channels experience more views. 

  1. The Ad Type

The type of ads placed on your videos will also determine your CPM. Common ad types include display ads, non-skippable ads, sponsored ads, and overlay ads. Typically, video ads have a higher CPM than display ads because your viewers can’t escape a video ad. 

  1. Type of Content

First, you can’t make money if you have a made-for-kids channel. Similarly, adult, violent, and gun content can lower your CPM. Always follow YouTube’s community guidelines to make sure you are following all the guidelines to earn the highest possible CPM. 

Final Thoughts

There you go, everything you should know about YouTube CPM 2021. Follow these guidelines to start making money off your YouTube videos.