Andrew Chen Archives

Subscribe · Featured · Recent · The Cold Start Problem 📘
Dear readers, I have moved to Substack and I will be writing here from now on:
In the meantime, I will leave up for posterity. Enjoy!

5 factors that determine your advertising CPM rates

An interesting post at Techcrunch: Pubmatic Data Suggests Small Sites Command Higher Rates For Remnant Ads Than Large Sites.

I love seeing this cross-site ad monetization data, since it’s rare to get your hands on it unless you work for an ad network. For people outside the ad industry, advertising CPMs seem like black-boxes.

How to guess CPMs – 5 factors
At Revenue Science, a regular game of mine was to eyeball a site and guesstimate the CPMs.

A couple of the factors that I’d use:

  1. Is the site “sticky” or is it a one-hit wonder (like a reference site)?
  2. Is the site pretty general, or is it in a particular category (like cars)?
  3. Who uses the site? Everyone (including international) or just US?
  4. How dependent is the site on Google SEO versus a community site that draws people back?
  5. How many pageviews does the site have? Is it a lot? Or is it a small amount

Easy to monetize, hard to monetize
For the people who are curious, this is the easiest to monetize:

One-hit wonder site that exist in a particular category, are based in the US, and have lots of search traffic

In particular, your site is likely to have high CTRs since people are in a “transactional” mode. If you have all of those, and have a ton of pageviews, then you’ll make a ton of money.

The hardest to monetize?

Highly sticky sites that are general (like communication), based 100% outside of the US/Europe/Japan, with lots of pageviews

In a setup like this, not only are people unlikely to want to buy anything, even if they did, there’d be no way to make money off of this group.

Example categories
As a rough rule of thumb, I’d typically guess the following – these are very rough approximations, just to illustrate a couple points:

  • Social sites (forums/chat/etc) without direct ad sales teams: <$0.25 CPM
  • Largely international sites: <$0.50 CPM
  • Medium-sized sites that use banner ad networks: <$1 CPM
  • Reference sites in a specific category: >$5 CPM or sometimes much higher, depending on category – we ran into home improvement reference sites that did $20 CPMs

Because we were mostly dealing with so-called “remnant” advertising, these numbers are likely to be at the bottom of the range for these sites. That is, social networks might quote a CPM of $20 CPM, but what they really mean is that 1% of their inventory is sold at that, and the rest of the 99% is sold at <$0.25 prices.

As you can see, as a website property, you fall into either of two categories:

  • Horizontal sites used daily which command low CPMs with huge pageviews
  • Vertical sites that capture user intent – often used intermittently (with lots of traffic from search) with high CPMs and low pageviews

Horizontal sites, when scaled up to a large enough site, can employ direct ad sales teams that raise the CPM by a significant amount, but the entire process is demand-constrained.

Google is lucky to be both horizontal and vertical – it’s used everyday by people, but also captures user intent.

As stated before, social networks monetize poorly

Of course, sites with lots of pageviews are often ones that are general, are sticky, and have lots of context-less social content. I’ve written up a broader discussion of social network monetization at “5 things that make your social network monetize like crap.”

Back to small sites versus large sites
Now, the Techcrunch article discusses the idea that small sites monetize better than large ones. I think that’s actually a correlation rather than a causation. There are a ton of small sites out there, and much of their traffic comes from Google. It’s much harder to build a functioning social site where people coming back daily than a site where people occassionally stumble on it through their search engine.

As a result, my guess is that the mindset of the typical user includes intent – and that makes all the diference.

PS. Get new updates/analysis on tech and startups

I write a high-quality, weekly newsletter covering what's happening in Silicon Valley, focused on startups, marketing, and mobile.

Views expressed in “content” (including posts, podcasts, videos) linked on this website or posted in social media and other platforms (collectively, “content distribution outlets”) are my own and are not the views of AH Capital Management, L.L.C. (“a16z”) or its respective affiliates. AH Capital Management is an investment adviser registered with the Securities and Exchange Commission. Registration as an investment adviser does not imply any special skill or training. The posts are not directed to any investors or potential investors, and do not constitute an offer to sell -- or a solicitation of an offer to buy -- any securities, and may not be used or relied upon in evaluating the merits of any investment.

The content should not be construed as or relied upon in any manner as investment, legal, tax, or other advice. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment. Any projections, estimates, forecasts, targets, prospects and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Any charts provided here are for informational purposes only, and should not be relied upon when making any investment decision. Certain information contained in here has been obtained from third-party sources. While taken from sources believed to be reliable, I have not independently verified such information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. The content speaks only as of the date indicated.

Under no circumstances should any posts or other information provided on this website -- or on associated content distribution outlets -- be construed as an offer soliciting the purchase or sale of any security or interest in any pooled investment vehicle sponsored, discussed, or mentioned by a16z personnel. Nor should it be construed as an offer to provide investment advisory services; an offer to invest in an a16z-managed pooled investment vehicle will be made separately and only by means of the confidential offering documents of the specific pooled investment vehicles -- which should be read in their entirety, and only to those who, among other requirements, meet certain qualifications under federal securities laws. Such investors, defined as accredited investors and qualified purchasers, are generally deemed capable of evaluating the merits and risks of prospective investments and financial matters. There can be no assurances that a16z’s investment objectives will be achieved or investment strategies will be successful. Any investment in a vehicle managed by a16z involves a high degree of risk including the risk that the entire amount invested is lost. Any investments or portfolio companies mentioned, referred to, or described are not representative of all investments in vehicles managed by a16z and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results. A list of investments made by funds managed by a16z is available at Excluded from this list are investments for which the issuer has not provided permission for a16z to disclose publicly as well as unannounced investments in publicly traded digital assets. Past results of Andreessen Horowitz’s investments, pooled investment vehicles, or investment strategies are not necessarily indicative of future results. Please see for additional important information.