Minimum CPMs, CPM Floors, Floating Defaults and How They Can Make You More Money
The way that an advertising network generally works is that they serve as many paying ads as they possibly can and then they will serve what is called a default. The default is an image or advertisement (often times this is code for another ad network) that you specify for them to serve in the event that they run out of paying ads. This is extremely likely to happen – hence why it’s a good idea to align yourself with multiple quality ad networks.
The practice of placing ad networks one after another in this chain of defaults is sometimes called “daisy chaining.” While it may not be the best you can do, it is still far better than working with only one ad network and only generating revenue from the ads that they can sell because you are further maximizing your CPM (or cost per one thousand impressions).
Minimum CPMs, CPM Floors and Floating Defaults
There are different names for this feature – Burst Media calls it a minimum CPM, ValueClick Media referrers to them as floating defaults and Tribal Fusion labels it a CPM floor – but it is essentially the same thing. Instead of simply having a default that a network only serves when they run out of all paying ads, you can tell them that you want them to serve the default if they are no longer able to serve paying ads that are purchased for a certain amount or higher.
So, let’s break this down a bit. Let’s say you have three ad networks you are working with. You have them set up in a chain of defaults. You have 100,000 ad impressions (not pageviews, but ad impressions) for a month. The first one is filling 95% (95,000 impressions) of your ad traffic. This leaves 5% (5,000 impressions) for the second one and 0% for the third one. The first one is paying $0.40 CPM and the second one is paying $0.40 CPM, as well. At this rate, you make $40 for the month.
You decide to set a floating default on the first ad network of $0.20 and you set a floating default on the second ad network at the same rate. With this set price in mind, your first network is now only able to fill 40% of the impressions. But, since the ads are generally higher paying due to them not serving you a lot of cheaper ads, your CPM with them is now $0.70.
The second network now receives more traffic and is sent 60% of your overall ad traffic. But, they are only able to fill 50% of that. Again, though, with the floating default, their CPM is now higher, earning you $0.60 per one thousand impressions. Finally, your third network, with no floating default, receives everything else – the final 30% – and is able to fill it at a rate of $0.30 CPM.
For the month, the first network earned $28, the second network earned $18 and the third network earned $9 for a grand total of $55. This is a gain of just over 37%. $55 may not be a lot, but if you run the example over more traffic and higher CPMs, 37% can be a lot of money and every dollar counts.
Note that this isn’t scientific in any way, it’s just a typical example of my experience working with a floating default. And they can work whether or not you use an ad server.
Why They Work
If you tell the first ad network to serve whatever it can, that’s what it will do. It will hog, for lack of a better word, all of the impressions and it will serve you higher paying ads and cheap ads, all the same. It will serve everything it can until it has nothing left to serve.
But, the idea should be to get the higher paying ads as much as possible and, if one network runs out of higher paying ads, shift your traffic to the next one, to get their higher paying ads. This is the beauty of working with multiple ad networks.
Even if an individual network is serving less impressions, it doesn’t necessarily mean that they will much less money. For example, look at the example above. At the beginning, the first network was generating $38 on 95,000 impressions. But, with the floating default, they now made $28 on 40,000 impressions. The impressions dropped about 42%, but the revenue only dropped around 26%. This is because the ads that are now being served are higher paying overall. The cheaper ads have been removed. Your mileage will vary.
If you work with multiple ad networks, but the first tier network is sucking up all of the traffic, there really is little reason to work with those additional networks. But, together, with filters like this in place, they will work better for you. The key to it is experimentation. Test and see what works for you. But, floating defaults are a simple, easy way to safely grow your revenue.
