Advertisers use various payment models when they pay Publishers for showing their ads, and this sometimes causes confusion. The revenue model for Publishers doesn't directly correlate to the structure of the advertising payment model.
For starters, let's understand the Advertiser models, whose terms can be confounding. Advertisers can choose to pay Publishers for impressions (CPM), completed views (CPCV), or installs (CPI), explained below:
- Cost per Install (CPI) is the most commonly used model by app or game advertisers. The advertiser only pays the Publisher if a user watches an ad, downloads the app advertised in the video, and opens the app at least once. Without this event, the Advertiser doesn't pay. To translate this to Publisher revenue, we calculate a conversion rate (how well the ad converts with users) over 1000 views.
- Cost per Mille (CPM) is a straightforward choice by advertisers. For advertisers, the flat CPM metric is calculated as Cost ÷ (Views * 1000) and tells them what it costs them to show 1,000 video impressions of their ad. In this case, a view is defined as any portion of the ad being watched (don't confuse it with a completed view, below.)
- Cost Per Completed View (CPCV) is a commonly used model by brand advertisers. A video trailer is defined as having been watched or “completed” if 80% or more of the video has been played (for example, 12 seconds of a 15-second video). Without this event, the Advertiser doesn't pay.
Publisher revenue, on the other hand, is based an Effective Cost per Mille (eCPM) model. Cost Per Mille is the cost for every 1,000 impressions, also called views (not to be confused with completed views). This formula is similar to the flat CPM, but takes fill rate into account, and is calculated as follows:
Publisher eCPM = Revenue ÷ Impressions * 1000