With over two billion monthly active YouTube users, YouTube is an undeniably powerful channel for advertising — which means, if you're a YouTube creator, there are plenty of opportunities for you to make money off the platform.
For instance, if advertisers pay to display ads on your videos, you can increase revenue in the form of CPM.
Along with increasing your revenue, CPM is a strong indicator that your content is valuable, and helps you identify businesses with whom you may want to partner down the road.
Whether you've been a YouTube creator for years or are just starting out, CPM is an important metric to understand to ensure you're maximizing YouTube's potential as a revenue generator.
Here, we'll explore what CPM is, how it's calculated, and what makes a "good CPM".
What is CPM, and how is it calculated?
CPM, or cost per 1,000 impressions, is the cost an advertiser needs to pay on YouTube for every 1,000 impressions their ads receive on your video.
CPM varies depending on how much an advertiser pays to display the ad. Ad price on YouTube depends on a range of factors, including bidding price, type of ad, and consistency.
So, for instance, let's assume an advertiser is paying $9 for an ad, and the ad was seen 5,000 times on your video. To calculate CPM, you'd divide 9 by 5,000 = $0.0018, then multiply $0.0018 by 1,000.
The CPA, then, is $1.80. You'll receive 55% of that $1.80 — since YouTube takes a percentage of the CPA, as well (45%, to be exact). So if you make $1.80 CPA off an ad, you'll only keep $0.99.
Additionally, there's another type of CPM: playback-based CPM. Rather than calculating the cost the advertiser pays for 1,000 impressions, playback-based CPM calculates the cost an advertiser pays for 1,000 video playbacks where an ad is displayed.
There are free calculators available online, if you don't want to calculate your CPM manually. And while individual videos' CPMs might seem small (like the $0.99 made, above), it can add up to a hefty monthly earning if plenty of businesses see your videos as consistently worthwhile platforms for their promotions.
Why is CPM important?
As a YouTube creator, CPM is an important metric for analyzing which of your videos are most valuable to advertisers. Since advertising is the primary method for monetization on YouTube, this is critical information.
To make a full-time career out of YouTube, it's critical you know which videos can be monetized so you can create a more efficient, long-term strategy to target those types of topics.
For instance, perhaps you create YouTube videos for beauty, health, and wellness — but you find, in particular, "Drugstore Makeup Tutorials" receive the highest CPMs. This might suggest you should create more content that aligns with that topic.
Additionally, you might find one business in particular consistently advertises on your videos. If the brand aligns with your own values, you might reach out directly to discuss other YouTube partnership opportunities, like affiliate marketing.
Average CPM on YouTube
CPM varies greatly depending on how much an advertiser pays to distribute an ad on your video.
For instance, let's say an advertiser pays $10 for an ad that plays on your video, which has 1,000 views. If that's the case, you'd make $10 CPM (10/1,000 x 1,000). Of course, then, you'll need to take 45% off that total — making your earnings around $5.
However, in most cases, the videos on which businesses choose to advertise will have more than 1,000 views, making your earnings closer to $7-$10.
Jilliian Hope, HubSpot's Senior Manager of Brand Advertising, agrees, telling me her team typically sees an average of $7 to $10 from past campaigns.
However, CPM varies by country. For instance, one source reports the United States has an average 0.38 CPM, while Spain is 4.38, Switzerland is 3.87, and Mauritius is as high as 7.05. This means the amount of money you make off YouTube depends, in part, on your geography.
Highest CPM on YouTube
The highest CPM varies by country, but here's a list of the five highest CPA rates by country, as reported by one source:
Additionally, certain niche topics will ultimately have higher CPMs. Industries that a) perform well on YouTube and b) are incredibly profitable, will perform better in terms of CPM. These industries include:
As a brand, you should use CPM as a metric to help you identify which topics seem most valuable to advertisers, since those topics likely provide the most opportunity for monetization.