If you’ve thought about monetizing your YouTube channel, you might have come across a term that seems to play a big role: CPM. But what does ‘CPM’ stand for and how does it influence your YouTube earnings?
Let's take a look.
What does ‘CPM’ stand for?
CPM stands for “Cost per Mille”, which translates to “cost per thousand”. In the case of YouTube it refers to a thousand views. What does it mean, though?
The CPM is the cost that an advertiser pays to show their video one thousand times.
Example: An advertiser might have a CPM of $4. This means they pay on average $4 to show their ads to 1,000 people.
It’s important to understand that CPM is first and foremost about what an advertiser pays. It is not a measurement of how much a YouTuber earns from advertising.
In fact, a channel that gets ads with a low CPM could earn more money than a channel with high CPM ads. Why? Because CPM is only one factor in the money chain that goes from the advertiser to the YouTuber. Let’s take a look at this chain.
1. YouTube takes 45%
First of all, before you get ecstatic over the reported average CPM of $7.60 or more, you have to be aware that YouTube takes a cut of 45% on your earnings. $7.60 becomes $4.18, $10 becomes $5.50, and $2 becomes $1.10.
2. Only monetized views count
Now here’s where most new YouTubers make mistakes when projecting earnings: They assume every video view counts. For example, you might think that one thousand views at a CPM of $5 and a cut of 45% will earn you $2.75.
This prediction, however, would assume that for every view that your video gets, an ad is shown to someone. It would assume that every view is monetized. Unfortunately, that’s not the case. Only some of your views will be monetized and often that part can be disappointingly low.
Here are some possible reasons why some of your views don’t get monetized:
- Not all ad spaces are sold out. Particularly if you’re a smaller channel, there might simply not be enough paying ad clients to serve an ad every time your videos are viewed.
- When viewers watch multiple videos, they will only be shown ads sometimes for the sake of a better user experience.
- You know those skippable ads that play before videos? When a viewer skips them, it doesn’t count as a monetized view.
- Many YouTube users use adblockers that will disable ads for the whole site.
The number of monetized views has a big influence on what you’re earning. In case you find this a little hard to grasp, take a look at this example:
We have two channels: Channel A and Channel B.
Last month Channel A had a CPM of $4 and Channel B had a CPM of $7.
However, 70% of Channel A’s views were monetized, while Channel B had only 35% monetized views.
Now, how much $ did Channel A and Channel B make per thousand views?
45% YouTube cut: $1.8
Deduct the cut: $4 - $1.8 = $2.2
Multiply with monetized views:
$2.2 * 70% = $1.54
45% YouTube cut: $3.15
Deduct the cut: $7 - $3.15 = $3.85
Multiply with monetized views:
$3.85 * 35% = $1.35
The result: Channel A earns $1.54 per thousand views while Channel B earns $1.35 per thousand views.
That means Channel A is more profitable although its CPM is lower.
Of course, this example is a little extreme (Channel A has twice as many monetized views as Channel B), but it demonstrates that monetized views do have a lot of power over the final earnings.
Your real earnings: eCPM/RPM
Okay, so we’ve found out that CPM is not a measurement of what you’re earning with your YouTube videos. But does some sort of measurement exist? A term for what you earn per thousand views?
Yes, indeed. Actually, there are two terms:
RPM and eCPM.
RPM stands for “revenue per mille”, while eCPM is short for “effective cost per mille” - and both mean exactly the same: Your revenue for 1,000 views.
I will refer to it as eCPM from now on to make the article a little easier to read.
How to calculate your eCPM
YouTube doesn’t show you your eCPM. So if you’re curious about what you’re earning per 1,000 views, you will have to calculate it for yourself.
Thankfully, the equation is pretty simple:
Earnings/Monetized Views * 1000
Here an example with random numbers:
Monetized views: 45,678
$87/45678 * 1000 = $1.90
eCPM = $1.90
You could also calculate how much money you earn per view (including unmonetized views). Then simply adapt the equation like this:
Earnings/Views * 1000
Views (monetized and unmonetized): 186,315
$145/186315 * 1000 = $0.77
Earnings per 1,000 views: $0.77
What's the average CPM on YouTube?
Now one last question as long as we’re talking about CPMs: What’s the average CPM on YouTube?
Unfortunately, there is no official answer. There is an estimate, though:
According to Tubemogul, the average YouTube CPM in 2013 was $7.60.
That’s pretty much the only data we have right now. Since this information is pretty dated we’d better not rely on it, though. In the last 2-3 years YouTube has changed a lot and we can only assume that the average CPM has, too.
However, there are some reference numbers you can use to get a realistic estimate of what’s possible.
- In his article ‘The $1,000 CPM’ (a very interesting read!). Hank Green speaks of a $2 eCPM average for his videos.
- Social Blade estimates an eCPM between $0.25 and $3.50.
- The video analytics tool vidIQ assumes an average eCPM of $1.50 on all videos.
Any more CPM questions?
I hope this article has cleared up some confusion around the term ‘CPM’ and didn’t just confuse you more. If you have any additional CPM and earning questions, please leave them in the comments! Also, if you have come across data about the average CPM, please let me know. We definitely need an update for this.