What factors affect Facebook ad CPM?

CPM (cost per thousand impressions) is probably the most important and most volatile metric that affects Facebook ad performance. The cost of reaching a user can determine whether an ad performs well or poorly.

Certain settings made by the optimizer can have a positive or negative impact on CPM, and some unreliable factors can also cause temporary or random surges in CPM, making it difficult to accurately attribute changes in CPM.

So I wrote this article in the hope that advertisers will take CPM seriously and understand how invisible forces affect ad performance.

First, let’s take a deep look at the various factors that affect CPM: both controllable and uncontrollable.

Controllable factors

First, understand several factors that can increase ad CPM.

Audience suggestions

If you choose to give up using Advantage+ Audience and choose the original audience option, you can choose to further restrict the potential audience settings.

When setting up custom audiences through Advantage+ Audience, custom audiences are treated as audience suggestions or audience signals.

However, if you use the original audience options and set up a custom audience, the advertising system will only target the custom audience, not the audience signal.

Those advertisers who choose to use the original audience options do so to limit the audience and achieve precise audience targeting, but doing so will generally increase CPM.

Demographics

When using Advantage+ Audience, only the minimum age setting in Audience Controls is considered a hard limit. Otherwise, the gender and age range are considered audience suggestions and the algorithm can expand the audience size as it pleases.

If you switch to the original audience options, you can completely limit the age and gender of the audience, giving the ads more control.

In some cases, limiting demographics makes sense, and many advertisers believe that this is necessary, but this is not the case. This may also drive up CPMs.

Geography

It is a well-known fact that the cost of advertising coverage in some countries is much higher than in others due to competition between advertisers. You may have no choice, and the country you target will affect your CPM.

Ad Placement

Meta prefers advertisers to use Advantage+ Placements so that all placements can serve. You can manually remove any placement, but this will limit the algorithm.

Sometimes it is necessary to remove certain placements to prevent ads from showing on low-quality placements in a specific location. But in the vast majority of cases, please do not do this, which will also increase CPM.

Estimated CTR/Engagement Rate

This is an estimate of the probability that the audience will click/engage with your ad. A high estimated CTR/Engagement Rate can help advertisers win the ad auction with a lower bid. A low estimated CTR/Engagement Rate will have the opposite effect.

Essentially, it’s all about creating ads that inspire your desired action. If you don’t do it well, you may increase your CPM.

Ad Quality

Another factor that affects auction performance is ad quality. This has nothing to do with estimated CTR/Engagement Rate. Instead, Meta uses signals from users to detect signs of clickbait, engagement bait, and other low-quality ads that violate advertising policies. Low-quality ads lead to high CPM costs.

Uncontrollable factors

While the settings and modifications to the campaign may increase the CPM cost, there are other factors that are completely beyond the advertiser’s control. You may say that the final factor is the industry factor, but I will ignore it here and focus on the dynamic factors because the industry is often a static factor.

  1. Competition

The more ads in the advertising system that target the same audience, the higher the advertising cost. This is due to the competition coefficient, especially reflected in the sharp rise in CPM before Black Friday and the sharp drop in CPM after the New Year.

However, advertisers cannot control the choices of other advertisers, so the competition for ads is completely random.

  1. Learning period

During the learning period, advertising delivery and performance are the most unstable. You will often see CPMs that are too high during this time. Even if the ad never enters the learning phase, CPMs tend to be higher in the first few days of the ad.

  1. Randomness

Sometimes we can’t explain that CPM costs will rise or fall for no reason. More precisely, there must be some other complex reasons why CPM costs can be so different under the same ad set settings, which are happening behind the scenes and we cannot know.

In a nutshell, advertisers should not pay too much attention to CPM because there is always unpredictable and uncontrollable randomness.

CPM is a secondary metric

We cannot deny that CPM is an important metric. A positive but artificially high CPM can seriously affect the cost of advertising.

Nevertheless, we cannot regard CPM as the main metric. It is not a key performance indicator (KPI). In most cases, do not make drastic changes to your ads to reduce CPM. Targeting cheap countries to reduce ad CPM is unlikely to bring better results for your ads. Lower CPM does not guarantee lower CPA.

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