There is a great deal of misinformation within the YouTube community about how Ad CPMs (cost per mille / thousand impressions) work with YouTube multi-channel networks (MCNs).
I frequently get asked by potential Partners what our network average CPM is, or what CPM they will have as part of our network. The potential Partners believe this information is necessary to make a decision about whether to join us or not.
It seems many YouTubers ask for this information because certain MCNs have misled the YouTube community about how CPMs for ads on YouTube are determined.
To be clear on this:
Anyone who says they can guarantee your channel will earn a certain CPM for a multi-year contract is lying.
There is NO WAY to guarantee a minimum ad CPM on YouTube.
It is IMPOSSIBLE to guarantee this.
This is why many networks that used to offer a guaranteed CPMs stopped doing it, switching to a % based revenue share model.
Furthermore, your channel’s average CPM will go up and down according to trends in the online advertising market. Advertisers simply spend more during certain times of the year than at other times (for example, the Christmas shopping season is a great time for YouTubers because the CPMs for all consumer-product related niches go up).
This means your channel’s average CPM at any one time will NEVER be fixed; the number will always be changing.
To understand why this is so, you need to be familiar with how Google AdWords works. This is because the majority of all ads sold on YouTube videos are served by Google AdWords.
Yes, overwhelmingly, the ads are served by Google AdWords, which also operates under the Google subsidiary name of DoubleClick.
How does AdWords Work?
Although Google likes to track AdWords and DoubleClick earnings as different sources, they are virtually identical products. So much that I consider them to be the same thing.
There are two main components to the YouTube ad display system;
AdWords / DoubleClick: The portal through which advertisers purchase ads to appear on YouTube videos as a pre-roll or end-roll.
AdSense: The system Google uses to track AdWords earnings by publishers (what Google refers to YouTube channel and website owners as) after deducting its 45% commission.
This is what YouTube’s help page says about AdWords / AdSense,
The Adsense ads displayed on your video are determined automatically by our system based on a number of contextual factors relating to your video. These factors include but are not limited to your video metadata and how you categorize your video.
We aren’t able to control all of the ads that appear with your videos manually. Similarly, we can’t guarantee that specific ads will be displayed with your videos.
We regularly monitor and update our content-targeting algorithms in order to deliver the most relevant ads to your video pages.
On YouTube, all ads are served on channels based on the keyword density of the video and channel the video is appearing on. The sorting algorithm used to determine what ads appear on what videos is nearly identical to how advertising is served by AdWords on websites; the keyword density of the video and related channel, and the available ad inventory for those keywords are the primary determining factors for what ads will appear on your videos.
For example, if you run a channel about manga and your video is ranking for “naruto wristbands” but only 100 advertisement impressions have been purchased against the keyword “naruto wristbands”, and there are 1 million other videos who also rank for “naruto wristbands”, your video probably won’t get any “naruto wristband” ads on it because there simply is not enough ad inventory for those keywords to go to all 1 million+ videos.
AdWords is an auction system; advertisers decide how much they will spend per impression to have their ad appear on a video.
Because each advertiser has the freedom to bid whatever they want, all keywords have different going rates in the market, because some keywords are more valuable than others to the advertiser.
Again as an example: an advertiser might bid only pennies on “naruto wristbands” because the advertiser only profits $5 per sale, but a lawyer who earns hundreds of dollars an hour might spend $10 or more per thousand views to ensure his ads are seen, because his successful sales result in a higher margin of profit.
Competition of the keywords
Additionally we must consider the competition of the keywords; that is, how many companies are bidding on those keywords?
AdWords is an auction system, so the more people who want to advertise on those keywords = the more costly those keywords become to advertise on.
So in summary, if you want to make money from YouTube ads then your videos need to rank for high competition keywords that command high CPMs in the AdWords Keyword Planner tool. Joining a network will not magically increase your channel revenue beyond the going rate on AdWords.
Networks Do Not Impact Channel CPM
The point I am making here is that different niches pay better than others. Your channel’s CPM has nothing to do with your network.
Once again, I stress this:
There is no way for your network to guarantee a certain CPM unless they are paying you far below what the average CPM is on YouTube. For example, the Machinima network once paid a flat $2 CPM to Partners because Machinima knew the average CPM for the gaming niche was $8 after Google took its cut.
(Machinima now pays a % of earnings like most MCNs do, because it is safer to pay a % of actual earnings than to hope the average CPM for your network’s niche doesn’t suddenly drop.)
Another thing that tends to confuse YouTubers:
Many networks’ advertise the average CPM of all videos in the network as the “network average CPM” but this information doesn’t tell YOU anything about how YOUR channel will perform. This is because your channel will have uniquely different keyword density rank than the network as a whole.
Example: If you are in a network of primarily gaming videos, and you make beauty videos, the network’s CPM average will be completely inapplicable to you because your channel does not rank for gaming related keywords.
YouTube ads are served via Google AdWords, and while MCNs have the ability to sell advertising that only appears on channels within the network as reserved ad inventory (reserved media placement), this inventory is still sold through the YouTube ad system and by advertisers who also conduct AdWords campaigns. This means the advertiser knows what the going rate for the keywords are.
When purchasing ad inventory directly from a YouTube MCN, the advertisers won’t pay a significantly higher rate than they would while using AdWords. This is, again, because of the margins involved in the business of the advertiser.
Is That Network Really Saying What You’re Hearing?
Networks usually are very careful to not lie about CPMs in their marketing materials; what they do is word their message in such a way that misunderstandings happen.
For example, they might focus on the CPM a specific channel had during a certain month, or they might mention the network average CPM.
What network recruiters usually do to convince Partners they can guarantee a certain CPM:
YouTube MCNs have large amounts of data at our disposal because we have thousands of channels, many of which belong to certain niches. It is easy for us to look at how existing channels are doing to gauge what other channels in the same niche can expect.
But we don’t even need to have channels in our network to know what the average may be. All we need to do is be capable of some high school level math.
For example, if you run a channel about paintballing all I need to do to figure out your estimated channel earnings’ CPM is to hop onto the Google AdWords Keyword Planner and look at keywords related to paintballing to figure out what the average CPM for that niche is. I can then deduct Google’s take and my network’s take to determine what CPM a paintball channel will probably earn as being part of my network.
If you believe YouTube MCNs are selling ads in such volume that these ads will always be served on all the billions of monthly views from channels in the network, I am sorry to tell you that you are very gullible and you need to make effort to become better educated about how the online advertising industry works.
For a YouTube MCN to make a high-volume ad sale from a brand, they have to do what is called a relationship based sale. There is a lot of communication that takes place to make these deals happen, including phone calls and meetings, before money exchanges between the YouTube MCN and the advertiser.
It frequently takes months to work these arrangements out, and there is only a finite amount of ad inventory that will be sold this way, usually in the area of tens of millions of views, sometimes hundreds of millions. The deals sometimes only last for a set period of time, such as a week or a month. It takes a lot of energy from the sales staff to make these deals happen, and MCNs generally do not employ a lot of sales people.
Furthermore, brands typically do these deals as part of a specific campaign such as the launch of a new product line, and they generally want the ads to only appear on the highest-traffic YouTube channels in the network, not the low-traffic channels.
The only exception is when advertisers do mass-integrated brand sponsorships through a network, such as Microsoft’s Xbox One Launch promotion with Machinima. For a short time, Machinima Partners earned additional money if they uploaded a video about Xbox One, but these earnings capped out at a certain number of views. Any additional views beyond the cap did not earn the Partner additional revenue (Good for the advertiser, but not great for the Partners considering that it was a $2 CPM).
The only reason AdWords works is because it does not rely on relationship based sales tactics. AdWords is a nearly automated system where anyone — from small business to mega-brand conglomerate — can buy as many ads as they want in less than 10 minutes. It is the eBay of ad buying.
This ease of use is why the bulk of the ads served on YouTube channels come from AdWords, not from special deals made between YouTube MCNs and brands.
The ONLY exception to the above information is if your channel is “Google Preferred” where advertisers can receive guaranteed ad placement on a specific YouTube channel. Google Preferred means your channel is among the 1% top performing channels on YouTube. Google Preferred Channels have millions of subscribers, so unless you also meet that requirement you probably should not expect this exception to apply to you.
I hope that after reading this article you are better educated about how Ad CPMs on YouTube actually work so that you can make a more informed decision about which network to join.
Here at Power Up TV we strive to be straight-shooters. We don’t find it wise to give Partners unrealistic expectations, as our goal is to truly help our Partners grow.
Furthermore because we do not have locked-in contract terms for our partnerships we don’t gain anything by lying to our Partners just to get them to sign a contract.
How much money your YouTube channel can expect to earn from ads depends on your content niche, not your network.