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2/20/2007
  New Column in AdWords - Average CPM
Andrew posts that Google AdWords has added new features. The Inside Adwords blog covers the Quality Score updates. In this post, I'm going to cover the meaning of the Average CPM column.

To see the Avg. CPM column, click on a campaign in AdWords. Then you get the "Campaign Summary" screen, showing you the AdGroups under the campaign.

In the top part of the list of ad groups, there is a "customize columns" link. Click on that, and select "Average CPM". The list of ad groups will refresh, and add a column for Average CPM.

What does Average CPM mean? It's your average cost of 1000 impressions for your ad group or search keyword. It depends on the following factors:

Google computes the Average CPM by multiplying your CTR * CPC * 1000.

Example:
Ad GroupCTRCPCAvg. CPM
AdGroup 1 25% $0.70 $175.00
AdGroup 2 12.5% $0.70 $88.75
AdGroup 3 12.5% $0.35 $43.75

In the table above, you see that with a very high CTR (i.e. 25%), you are grabbing a lot of clicks per 1000 impressions - so your Average CPM is high. If your CPC goes down, or your CTR goes down, your Average CPM will fall as well.

I think the best thing about the Avg. CPM is that it allows you to think like Google.

Google is selling ad space by CPM - even though most people think they are selling by CPC. They are trying to maximize CPM for the pages that they put ads on! That's how they measure monetization.

Google has quality score and ad rank to increase relevance and improve monetization, but those imply that a key monetization metric is page CPM. At the end of the day, they compute overall CPM for all the ads on a search engine result page (SERP).

Understanding Avg CPM, and understanding how Google sees the overall CPM of the ads on the page is instructive and helpful - especially when dealing with a competitive keyphrase.

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