AdvertisingConsumer Internet

More page views means lower CPMs

By October 18, 2007 6 Comments

Up until now I have thought that CPMs on social networks are low mostly because people are familiar with the layout of pages and their eyes immediately go to the content that they want.  In other words ad-blindness is particularly acute.

I still think that is a large part of the explanation, but the fact that click through rates fall with the number of page impressions has also got to be important.

It turns out that the longer someone has been on a site the less likely they are to click on an advert.  The relationship might look something like this:

These numbers are hypothetical, but they imply that someone who has looked at 10 pages on a site is 1/6th as likely to click on an ad as someone who is still on their first page (rough reading of the graph as 3% clickrate for one ad-view and 0.5% clickrate for 10 ad-views).

Given that CPMs are generally calculated as a function of click through rate the implication is that CPMs on a site where the average user views 10 pages should be 1/6th of the CPMs on a site where the average user views only one page.  (The maths here is a little off, but you get my drift.)

That leaves us with the paradox that if you increase the average number of page views per user your CPM will fall.

As we know social networks are sites where average page views per user are typically very high – this argument goes some way to explaining their low CPMs.  It also rings true intuitively – if someone is busy clicking through 150 pages in a Facebook session she is most unlikely to stop and click on an ad.
This post is largely taken from 5 things that make your social network monetise like crap by Andrew Chen.  He makes a number of other interesting points in the post which is well worth a full read.  I will leave you with one other – there will be a range of CPMs on any given site, but people tend to quote the highest.