I recently finished reading Stealing MySpace, an interesting “inside-baseball” look at the building of MySpace and eventual sale to Rupert Murdoch’s News Corp. for $750MM.
While the MySpace story had a happy ending for most, it also reminded me of the surprisingly low e-CPM (effective CPM or cost per thousand) of many Web sites that either sell through third-parties or have ad inventory that’s difficult for advertisers to understand/value.
MySpace earned an e-CPM of about $.20 in its early days (November 2004).
To put an eCPM of $.20 into perspective, that means that MySpace had to generate 500,000 page views on its Web site to earn just $100 in advertising revenue…or 5 million page views to earn $1,000… or 50 million to earn $10,000.
Now, MySpace charged much higher CPMs (up to $2 or so) on many of its pages, but the average it received for all of its pages was closer to $.20, according to the book.
For those of you thinking of selling advertising on your Web sites, I thought I’d add a few other less-known e-CPMs or CPMs for you:
Now, interestingly, while all these e-CPMs and CPMs seem low, all of the companies mentioned were profitable. That’s because their cost of delivering 1,000 page views was very, very cheap.
MySpace, for example, spent only $.07 on what I call “Hosting CPM” (i.e. delivering each of its 1,000 page views) in its early days (November 2004); and since they had minimal other expenses at the time they were able to break even at that point.
My colleague’s Tips Web site (in the fourth bullet above) spends only 3.5 cents in Hosting CPM and minimal other costs, so he makes a profit.
To see the other costs in running a Web site check out my How Much to Pay for a Customer article.
Your e-CPM Scales as You Scale
The economies of scale work in your favor as you are able to command higher CPMs as your volume of page views (and brand value) increase.
For example, MySpace is now reportedly generating $75MM per month through about 40 billion page views for an e-CPM of about $1.88, according to this Silicon Alley Insider article.
So, they almost 10Xed their e-CPM from their early days!