It doesn’t seem unreasonable to expect that doubling your page views should double your earnings, yet this is rarely the experience of content producers who see sudden surges of traffic. All too often RPMs drop almost mirroring the traffic increases and resulting in far lower incremental revenue gains than they might hope.
If the new traffic is of lower quality this is easy to understand, but we see this pattern over and over when the traffic profile is larger, but otherwise unchanged.
In the chart below ad impressions are shown in yellow and RPM is in pink. As impressions increase the RPM has responded by dropping. If this looks familiar, read on to understand why this happens and why it isn’t always a bad thing.
When looking at performance changes, it is always useful to look behind what is driving those RPM figures. RPM is a product of Cost Per Click (CPC) multiplied by Click Through Rate (CTR). If your Impression RPM drops then it is because either: A) Your CTR has dropped, B) Your CPC has dropped or C) Both of these things have happened.
Why high traffic can lower your CPC
AdSense reporting encourages us to watch average performance numbers. Averages can be deceptive though and few advertisers will actually pay your average cost per click. The Revenue Profile report within AdSense provides a good demonstration of this.
The revenue profile report gives publishers insight into what high value bids they are attracting. In the above example, the publisher is achieving an average ad-request RPM of $0.39, but their top 10% of impressions are averaging $2.66.
One of the great strengths of AdSense is that it fills close to 100% of impressions. If the available inventory on a site increases that means that lower bids need to be accepted in order to fill those additional requests. There may be exactly the same number of impressions being sold at the higher price, but the additional inventory may go for a lower price in order to ensure that the impression is served.
An increase in the supply of available impressions also means less upwards pressure in the auction to push advertisers up to their maximum bid, again lowering the average price achieved for an impression. In short, they might still get the high paying impressions, but they are joined by lower paying ones that drag the average down.
Why high traffic can lower your CTR
With the best performing ads likely to win auctions, an increase in available impressions also opens the door for less competitive advertisers. Less competitive advertisers might be lower quality, less compelling or might just be less precisely targeted to your audience. Any of these can result in ads that are less likely to get clicked and bring your average CTR down as a result.
Putting things in perspective
The “double-whammy” of lower CTR and lower CPC is usually bad news for publishers, and can certainly put a depressing slant on your RPM charts. When the double-whammy comes as a result of increased traffic the end result doesn’t have to be bad.
If we go back to our first chart and now also add a line in for revenue in blue, we get a more realistic picture of what is happening. The average performance metrics might be lower, but overall the site is earning more as a result of the increased traffic.
Metrics like RPM are useful tools to understand and use to get insights, but it is revenue that pays the bills. In the example above the site ended up more than doubling its earnings, a fact that soon helped alleviate any worries about falling RPMs.