Navigating Rising CPMs in CTV and the Impact on Media Efficiency

The cost of advertising on connected TV (CTV) platforms is climbing, with many advertisers noticing higher CPMs across CTV, programmatic, and social channels. This trend challenges marketers who aim to balance budget constraints with campaign performance. While rising CPMs might seem like a hurdle, understanding the dynamics behind these costs can help advertisers make smarter decisions and maintain media efficiency.

Higher CPMs affect CTV campaign budgets and media planning

Why Cheaper CPMs Don’t Always Mean Better Performance

At first glance, lower CPMs look attractive. Paying less per thousand impressions seems like a straightforward way to stretch budgets. But cheaper CPMs often come with tradeoffs that can hurt overall campaign results.

• Lower quality inventory: Cheaper impressions may come from less premium or less engaged audiences. For example, ads placed on lower-tier apps or less popular streaming channels might have lower viewability or engagement rates.

• Reduced targeting precision: Lower CPM inventory often lacks the advanced targeting options available on premium platforms. This can lead to wasted impressions on audiences that are less likely to convert.

• Higher fraud risk: Some low-cost inventory sources carry a greater risk of invalid traffic or ad fraud, which reduces the real value of impressions.

  
  

In contrast, premium CTV inventory with higher CPMs often delivers better engagement, stronger brand safety, and more precise audience targeting. This means advertisers may see better return on ad spend (ROAS) despite paying more upfront.

The Tradeoff Between Premium Inventory and Scale

Advertisers face a balancing act between buying premium inventory and achieving scale. Premium CTV spots come with higher CPMs because they offer:

• Access to high-quality, brand-safe environments

• More accurate audience data and targeting

• Better ad placement and viewability

  
  

But premium inventory is limited. When demand outpaces supply, CPMs rise, and it becomes harder to reach large audiences without expanding into less premium options.

To manage this tradeoff:

• Set clear campaign goals: If brand awareness and engagement are top priorities, focus on premium inventory even if CPMs are higher. For direct response campaigns, a mix of premium and mid-tier inventory might work better.

• Use frequency caps and pacing: Avoid overexposure on premium inventory by pacing spend and capping frequency. This helps stretch budgets and maintain audience interest.

• Test and optimize: Continuously monitor performance across different inventory tiers. Shift budget toward placements that deliver the best balance of cost and results.

  
  

Explaining Delivery Shortfalls When Inventory Is Constrained

When inventory is tight, campaigns may not deliver the planned impressions or reach. Clients often expect full delivery, so it’s important to communicate clearly about the reasons behind shortfalls.

• Be transparent about market conditions: Explain that rising CPMs reflect increased competition for limited premium inventory. This can restrict available impressions.

• Share performance data: Show how the impressions delivered performed compared to benchmarks. Highlight quality metrics like engagement, viewability, or conversion rates.

• Offer alternatives: Suggest adjusting campaign goals, extending timelines, or expanding targeting criteria to access more inventory.

• Set realistic expectations upfront: Before campaigns launch, discuss potential inventory constraints and how they might impact delivery.

  
  

Clear communication helps clients understand that delivery shortfalls are not due to poor planning but reflect broader market dynamics.

Practical Tips for Maintaining Media Efficiency Amid Rising CPMs

• Focus on audience quality over quantity: Prioritize impressions that reach your ideal customers rather than chasing large but less relevant audiences.

• Leverage data-driven targeting: Use first-party data and advanced targeting to improve efficiency and reduce wasted spend.

• Optimize creative for CTV: Engaging, relevant ads perform better and can justify higher CPMs by driving stronger results.

• Consider alternative formats: Explore interactive or shoppable CTV ads that can increase engagement and ROI.

• Monitor frequency and pacing closely: Avoid ad fatigue by controlling how often viewers see your ads.

  
  

By applying these strategies, advertisers can navigate rising CPMs without sacrificing campaign impact.