oCPM Bid Optimization

Many direct advertisers set up campaign line items using the optimized CPM (oCPM) billing model.

This page describes options for bid optimization by goal type, describes how the bidder calculates the bid price of each line based on its goal type and identifies valuable ad placements, and explains how adjustments to goal targets and maximum bid prices affect bidding,

This page explains how oCPM billing can be used with goal-based bidding to enable advertisers to maximize their return on investment.

Overview

Goal Types

If oCPM billing is selected, bidding is optimized towards the line’s objective as specified by its goal.

Eight goal types are supported for display lines: CPC, CPA, VCPM, CPCV, Minimize eCPM, Max Viewability, ROAS, and None.

Goal Type Use Case
CPC

A line defined by a CPC (cost per click) goal is optimized to maximize clicks: line performance is measured in terms of clicks and the bidder optimizes to bid on consumers that are more likely to click the ad.

A CPC goal is defined by a maximum CPM price, a target CPC, and a goal mode.

CPA

A line defined by a CPA (cost per acquisition) goal is optimized to maximize the acquisitions captured by the line’s conversion rules: the bidder is optimized to bid on consumers that are more likely convert, line performance is measured in terms of “conversions”, and line billing is based on conversions.

A CPA goal is defined by a maximum CPM price, a target CPA, a goal mode, and at least one conversion rule.

Max Viewability

A line defined by a max viewability goal is also optimized to maximize the number of viewable ad impressions. The bidder is optimized to bid on ad placements that are viewable, line performance is measured in terms of viewable ad impressions, and line billing is based on viewable impressions.

A max viewability goal is defined by a maximum CPM price and a viewability standard (by default, IAB/MRC).

Minimum eCPM A Minimize eCPM goal is defined by a CPM price.
VCPM

A line defined by a VCPM (viewability CPM) goal is optimized to maximize the number of viewable ad impressions. The bidder is optimized to bid on ad placements that are viewable, line performance is measured in terms of viewable ad impressions, and line billing is based on viewable impressions.

A VCPM goal is defined by a maximum CPM price, a target VCPM, and a goal mode.

ROAS A ROAS goal is defined by a target ROAS (return on ad spend expressed as a ratio), maximum CPM price, and at least one conversion rule.
None If the None option is selected, no goal type is specified for the line and bid optimization is disabled.

Bid Policy

The bid policy defines the rules that the bidder will use during the real-time auction to determine the amount a line will bid on an ad placement.

The bid policy is determined by the line’s goal type. DSP supports two broad types of bid policies that specify rules for cost-based goals and viewability-based goals.

Bid Policy Description
Cost-based

A cost-based goal is a goal that optimizes bidding towards meeting a metric-based objective specified by the line’s target goal. A cost-based bid policy weighs three variables to determine the amount bid by a line: the predicted worth of the ad placement, the maximum CPM price specified for the line, and a bid price that is calculated based on the line’s target goal.

Four goal types employ cost-based bid policies for display goals: CPC, CPA, VCPM, and ROAS.

Viewability-based Two goal types employ viewability-based bid policies for display goals: Max Viewability and Minimum eCPM goals.

Cost-Based Goals

Five display goal types employ a cost-based bid policy during real-time bidding: CPC, CPA, CPCV, VCPM, and ROAS.

A cost-based goal is a goal that weighs three variables to determine the amount bid by a line: the predicted worth of the ad placement, the maximum CPM price specified for the line, and a bid price that is calculated based on the line’s target goal.

During a real-time auction, the bidder analyzes the value of ad placements and dynamically bids the calculated bid price (the bid price) and comparing that with the line’s maximum CPM price:

  1. First, the bidder calculates the line’s bid price, the value of the ad placement to the line based on the line’s target goal The bid price is expressed in CPM, cost per 1000 impressions.
  2. Compare the ad placement’s bid price with the line’s maximum CPM price, the maximum price the advertiser is willing to pay for an impression.
    • If the bid price is less than the maximum CPM price, bid dynamically between 0 and the maximum CPM price.
    • If the bid price is greater than the maximum CPM price, bid the maximum CPM price. The bidder will not bid more than the specified max CPM.

Maximum CPM Price

The maximum CPM price is goal-level configuration that specifies the maximum amount that the advertiser is willing to pay per 1000 impressions.

Bid Price

The bid price is calculated in real-time for all cost-based goal types: CPC, CPA, CPCV, VCPM, and ROAS.

The bid price captures the value of an ad placement to a line based on two variables: the line’s target goal and the predicted KPI value of the ad placement. The formula used to calculate the bid price is goal-specific:

Goal Type Bid Price Formula
CPC Bid Price = Target CPC x CTR x 1000
CPA Bid Price = Target CPA x CVR x 1000
CPCV Bid Price = Target CPCV x CR% x 1000
VCPM Bid Price = Target VCPM x Viewability %
ROAS Bid Price =  Conversion Value / Target ROAS

Fixed CPM Bidding

To better assess the value of goal-based oCPM bidding, we’ll first take a look at bidding that does not utilize bid optimization.

The DSP supports eight goal type options for lines using oCPM billing. The None option specifies that no goal type is used and the DSP does not optimize line bidding.

If no goal type is specified, the line will bid on ads at a flat rate. This is known as fixed CPM bidding. With fixed CPM bidding, a line bids the same amount for each ad placement regardless of its predicted performance.

In the example, the fixed CPM is $2.00 regardless of the predicted performance.

flat-cpc

For fixed CPM lines, the value returned by the line (the eCPM) is generally less than the price paid per impression (fixed CPM bid price) because the second price auction usually results in a price reduction, and the cost eCPM is calculated by adding a small amount on top of the second highest bid.

oCPM Bidding

CPC Goals

A CPC line is defined by a goal of the CPC goal type. Every CPC goal is defined by a goal target and a maximum CPM price, the maximum cost per thousand impressions.

  • A CPC goal target specifies the cost per click that the advertiser is willing to pay for the line. [When you raise the CPC goal target, the line will bid more aggressively on inventory with a lower predicted CTR.]
  • A maximum CPM price specifies the maximum cost per thousand impressions that the advertiser is willing to pay for the line. [When you raise the maximum CPM price, the line will bid more aggressively on inventory with a higher predicted CTR.]

Bidding for CPC lines is optimized to maximize the number of clicks received. The line’s goal configures bid behavior. Depending on the predicted click-through rate of the ad placement, the bidder will bid dynamically based on the CPC goal target or bid the maximum CPM price. The bidder is optimized to bid on ad placements that are more likely to deliver the clicks that satisfy the line’s objectives.

For CPC lines, the bidder does the following during bid optimization:

  • Calculate the bid price: bid price = CPC x CTR x 1000.
  • Bid dynamically between 0 and the maximum CPM price if the line’s bid price is less than the maximum CPM price.
  • Bid the maximum CPM price if the line’s bid price is greater than the maximum CPM price.

In the diagram, the y-axis represents the bid price and the x-axis represents the predicted click-through rate (CTR) for an ad placement. The black line represent the amount bid based on the ad placement’s predicted click-through rate.

cpc-goals

The line’s CPC goal specifies the maximum CPM price ($2.00) and a CPC goal target ($1.00). The bidder will never bid over the maximum CPM price specified by the CPC goal.

The cost eCPM is less than the bid price because the second price auction usually results in a price reduction. The cost eCPM is calculated by adding a small amount on top of the second highest bid.

What happens if I increase the line’s CPC goal target?

When you raise the CPC target, the line will bid more aggressively on inventory with a lower predicted click-through rate (CTR). The line will reach the maximum CPM price at a lower eCTR.

The diagram shows the difference made by increasing the CPC goal target.

target-cpc

The black line represents the amount bid with a maximum CPM price of $2.00 and a goal target of $1.00. The blue line shows the effect of increasing the goal target to $2.00.

What happens when I raise the maximum CPM price?

When you raise the maximum CPM price, the line will bid more aggressively on inventory with a higher predicted click-through rate (CTR).

In the example, the maximum CPM price is increased from $2.00 to $3.00, and the target CPC is still $1.00.

max-cpm

In the diagram, the red line represents the amount bid on ad placements with a lower predicted CTR with the increase in the maximum CPM price. The blue line represents the amount bid on higher value inventory.

What happens when I raise the target CPC and maximum CPM price?

When you raise both the maximum CPM price and the CPC goal target, the line will bid more aggressively on all inventory.

In the example, the maximum CPM price is increased from $2.00 to $3.00, and the target CPC is increased from $1.00 to $2.00.

max-cpm-target-cpc

(Again, the black line represents the original bid strategy. The red line represents the amount bid on ad placements with a lower predicted CTR with the increase in the maximum CPM price. The blue line represents the amount bid on higher value inventory.)

What happens when I lower the CPC target and raise the maximum CPM price?

With this type of bidding, the line bids aggressively on impressions predicted to have a high CTR, and more conservatively on impressions predicted to have a low CTR.

The diagram shows line bidding after the maximum CPM price is increased from $2.00 to $3.00, and the CPC target is lowered from $1.00 to $0.75.

max-cpm-target-cpc

(Again, the black line represents the original bid strategy. The red line represents the amount bid on ad placements with a lower predicted CTR with the increase in the maximum CPM price. The blue line represents the amount bid on higher value inventory.)

CPA Goals

A line defined by a CPA goal is optimized to bid on ad placements that are more likely to produce actions or events that meet the line’s objectives as specified in one or more conversion rules.

A CPA goal is defined by its CPA target, maximum CPM price, a goal mode (hard goal or soft goal), and at least one conversion rule. The CPA target and Maximum CPM define the line’s bid strategy:

  • CPA target. The goal target specifies the average cost per conversion (CPA) that the advertiser is will to pay. When you raise the CPA target, the line will bid more aggressively on inventory with a lower predicted conversion rate over 1000 impressions (CVR). The line will reach the maximum CPM price at a lower eCVM.
  • Maximum CPM. The maximum CPM price specifies the maximum cost per 1000 impressions the advertiser is willing to pay. When you raise the maximum CPM price, the line will bid more aggressively on inventory with a higher predicted conversion rate over 1000 impressions (CVR).

DSP bid policy works as follows:

  • Calculate the bid price: bid price = CPA x CVR x 1000.
  • Bid dynamically between 0 and the maximum CPM price if the bid price is less than the maximum CPM price.
  • Bid maximum CPM price if the bid price is greater than the maximum CPM price.

In the diagram, the y-axis represents the maximum CPM price, the maximum price that the line is willing to bid per thousand impressions. The x-axis represents CVR, a metric that estimates the likelihood that an ad placement will deliver a conversion (the predicted conversion rate per 1000 ad impressions).

flat-cpc

In the example, the maximum CPM price is $2.00, and the CPA is $10.00.

The cost eCPM is less than the bid price because the second price auction usually results in a price reduction. The cost eCPM is calculated by adding a small amount on top of the second highest bid.

What happens when I raise the target CPA?

When you raise the target CPA, the line will bid more aggressively on inventory with a lower predicted conversion rate over 1000 impressions (CVR). The line will reach the maximum CPM price at a lower eCVM.

In the example, the maximum CPM price is still $2.00, and the CPA target is increased from $10.00 to $20.00.

flat-cpc

What happens when I raise the maximum CPM price?

When you raise the maximum CPM price, the line will bid more aggressively on inventory with a higher predicted conversion rate over 1000 impressions (CVR).

In the example, the maximum CPM price is increased from $2.00 to $3.00, and the CPA target is still $10.00.

flat-cpc

What happens when I raise the CPA target and maximum CPM price?

You can bid more aggressively by raising the both maximum CPM price and target CPA for lines billed on an oCPM basis. When you raise both the maximum CPM price and the target CPA, the line will bid more aggressively on all inventory.

In the example, the maximum CPM price is increased from $2.00 to $3.00, and the CPA target is increased from $10.00 to $20.00.

flat-cpc

What happens when I lower the CPA and raise the maximum CPM price?

You can change the bid policy by raising the maximum CPM price and lowering the target CPA for lines billed on an oCPM basis. With this type of bidding, the lines bid aggressively on impressions predicted to have a high CVR, and more conservatively on impressions predicted to have a low CVR.

In the example, the maximum CPM price is increased from $2.00 to $3.00, and the CPA target is decreased from $10.00 to $7.50.

flat-cpc

CPCV Goals

CPCV (cost per completed view) is a model that bills advertisers on the basis of completely viewed video ads.

Optimized CPM billing as it relates to bidding with Cost Per Completed (video) View (CPCV) goals for video ads.

If the CPCV goal is specified for a video line item, CPCV target values are used to calculate bids with oCPM billing.

DSP bid policy works as follows:

  • Calculate the bid price: bid price = CPCV x CR% x 1000
  • Bid dynamically between 0 and the maximum CPM price if the bid price is less than the maximum CPM price
  • Bid maximum CPM price if the bid price is greater than the maximum CPM price

The cost eCPM is less than the bid price because the second price auction usually results in a price reduction. The cost eCPM is calculated by adding a small amount on top of the second highest bid.

In the example, the maximum CPM price is $10.00, and the CPCV is $0.02.

prediction-process

What happens when I raise the Target CPCV?

You can bid more aggressively by raising the target cost per completed view (CPCV) for lines billed on an oCPM basis.

When you raise the target CPCV, the line will bid more aggressively on inventory with a lower predicted video completion rate percentage. The line will reach the maximum CPM price at a lower completion rate percentage.

In the example, the maximum CPM price is still $10.00, and the target CPCV is increased from $0.02 to $0.04.

prediction-process

What happens when I raise the maximum CPM price?

You can bid more aggressively by raising the maximum CPM price for lines billed on an oCPM basis.

When you raise the maximum CPM price, the line will bid more aggressively on inventory with a higher predicted completion rate.

In the example, the maximum CPM price is increased from $10.00 to $15.00, and the target CPCV is still $0.02.

prediction-process

What happens when I raise the target CPCV and maximum CPM price?

You can bid more aggressively by raising the both maximum CPM price and target CPCV for lines billed on an oCPM basis.

When you raise both the maximum CPM price and the target CPCV, the line will bid more aggressively on all inventory.

In the example, the maximum CPM price is increased from $10.00 to $15.00, and the target CPCV is increased from $0.02 to $0.04.

prediction-process

What happens when I lower the CPCV and raise the maximum CPM price?

You can change the bid policy by raising the maximum CPM price and lowering the target CPCV for lines billed on an oCPM basis.

With this type of bidding, the lines bid aggressively on impressions predicted to have a high completion rate, and more conservatively on impressions predicted to have a low completion rate.

In the example, the maximum CPM price is increased from $10.00 to $15.00, and the target CPCV is decreased from $0.02 to $0.015.

prediction-process

VCPM Goals

This article provides information on how to use optimized CPM billing as it relates to bidding with viewability cost per 1000 impressions (VCPM) goals for video ads.

For display lines, you can select viewability cost per 1000 impressions (VCPM) goals with optimized CPM (oCPM) billing.

DSP collects viewability information on all ads served through the platform, so each new line can piggyback on the platform history for viewability prediction.

For VCPM goals, the bidder uses the following bid policy during dynamic bidding:

  • Calculate the bid price: bid price = VCPM * Viewability %.
  • Bid dynamically between 0 and the maximum CPM price if the bid price is less than the maximum CPM price.
  • Bid maximum CPM price if the bid price is greater than the maximum CPM price.

In the example, the maximum CPM price is $2.00, and the VCPM is $4.00.

prediction-process

The cost eCPM is less than the bid price because the second price auction usually results in a price reduction. The cost eCPM is calculated by adding a small amount on top of the second highest bid.

What happens when I raise the Target VCPM?

You can bid more aggressively by raising the target Cost Per 1000 Viewable Impressions (VCPM) for lines billed on an oCPM basis. When you raise the target VCPM, the line will bid more aggressively on inventory with a lower predicted viewability rate over 1000 Impressions (viewability %). The line will reach the maximum CPM price at a lower viewability %.

In the example, the maximum CPM price is still $2.00, and the Target VCPM is increased from $4.00 to $8.00.

prediction-process

What happens when I raise the maximum CPM price?

You can bid more aggressively by raising the maximum CPM price for lines billed on an oCPM basis. When you raise the maximum CPM price, the line will bid more aggressively on inventory with a higher predicted viewability %.

In the example, the maximum CPM price is increased from $2.00 to $3.00, and the Target VCPM is still $4.00.

prediction-process

What happens when I raise the Target VCPM and maximum CPM price?

You can bid more aggressively by raising the both maximum CPM price and target VCPM for lines billed on an oCPM basis. When you raise both the maximum CPM price and the target VCPM, the line will bid more aggressively on all inventory.

In the example, the maximum CPM price is increased from $2.00 to $3.00, and the Target VCPM is increased from $4.00 to $8.00.

prediction-process

What happens when I lower the VCPM and raise the maximum CPM price?

You can change the bid policy by raising the maximum CPM price and lowering the target VCPM for lines billed on an oCPM basis. With this type of bidding, the lines bids aggressively on impressions predicted to have a high viewability %, and more conservatively on impressions predicted to have a low viewability %.

In the example, the maximum CPM price is increased from $2.00 to $3.00, and the Target VCPM is lowered from $4.00 to $3.00.

prediction-process

ROAS Goals

This article provides information on how to use oCPM billing as it relates to bidding with ROAS goals.

A ROAS goal is defined by a maximum CPM price, a target ROAS (return on ad spend expressed as a ratio), and at least one conversion rule.

  • To bid more conservatively, raise the line’s target ROAS.
  • To bid more aggressively, raise the line’s maximum CPM price.

For ROAS goals, the bidder uses the following bid policy during dynamic bidding:

  • Calculate the bid price: bid price = Conversion Value / Target ROAS.
  • Bid dynamically between 0 and the maximum CPM price if the bid price is less than the maximum CPM price.
  • Bid maximum CPM price if the bid price is greater than the maximum CPM price.

In the diagram, the y-axis represents the bid price and the x-axis represents the conversion value.

prediction-process

In the example, the maximum CPM price is $2.00, and the ROAS target is 1:1 ($1.00 dollar in ad-spend should generate a $1.00 conversion value).

The cost eCPM is less than the bid price because the second price auction usually results in a price reduction. The cost eCPM is calculated by adding a small amount on top of the second highest bid.

What happens when I raise the target ROAS?

When you raise the target ROAS, the line will bid more conservatively on inventory with a lower predicted conversion value. The line will reach the maximum CPM price at a lower conversion value.

In the example, the maximum CPM price is still $2.00, and the ROAS is increased from 1:1 to 1:1.5.

prediction-process

What happens when I raise the maximum CPM price?

When the maximum CPM price is raised, the line item bids more aggressively on inventory with a higher predicted conversion value.

In the example, the maximum CPM price is increased from $2.00 to $3.00, and the ROAS is still 1:1.

prediction-process

What happens when I raise the Target ROAS and maximum CPM price?

When both the maximum CPM price and the target ROAS are raised, the line item bids more conservatively on inventory with a lower predicted conversion value and more aggressively on inventory with a higher predicted conversion value.

In the example, the maximum CPM price is increased from $2.00 to $3.00 and the target ROAS is increased from 1:1 to 1:1.5.

prediction-process