How YouTube CPM Works

The reason why CPM varies so wildly is that the ads are sold on a auction basis. I'll simplify it:
There's 2 advertisers. Coke and Pepsi.

Coke has a massive ad budget. Money's not an issue. They'll pay $10 per CPM.

PEPSI is a bit more frugal. They'll pay $6 per CPM.

Youtube is going to serve as many Coke ads as it can, and mix some Pepsi in there so as not to piss people off with the same ads over and over. So sometimes you'll get the higher paying ad, and sometimes you'll get the lower paying ad.

Now does that make sense? Good, because it's about to get more complicated.

Now Dr. Pepper sees that Pepsi and Coke are in on the YouTube advertisement game. They want in too, but their budget is small. $4 per CPM. Now sometimes you're getting Coke, Sometimes Pepsi and sometimes Dr. Pepper. Your CPM is all over the place.

Make sense? Good, because it's about to get more complicated.

It's Christmas time. Coke's marketing team has some left over money and dammit they need to burn it. They up their CPM to $12. Pepsi knows that coke is doing this so they raise their CPM too. Dr. Pepper doesn't think YouTube ads are worth the money, they had a new product last quarter and now the marketing cycle for it is over. The same play out from before happens with higher CPMs.

In January Coke is more conservative because they saw Dr. Pepper drop off and Christmas is their big push so they drop their CPM to $5. Pepsi knows this and drops their's to $3 to save some money. YouTube creators everywhere bitch as if they didn't see it coming.

Make sense? Okay, let's get more complicated.

Coke decides it only wants to target men. Pepsi only wants to target women. Your videos are popular with more women. Now you only get Pepsi ads and no coke ads. Your CPM drops.

The next month, They flip their target. Now you're only getting coke ads. Your CPM skyrockets.
So you see, the CPM is a confusing formula, based on: 1) How much the advertisers are willing to pay. 2) The current size of the advertiser pool. 3) The season of the year and how big ad budgets are. 4) Who the advertisers are trying to reach vs. who your videos reach.

Then ON TOP of all that, YouTube has algorithms to play more ads on channels that get serial views. IE: Someone comes into the channel and watches several videos Vs. Someone that comes in to your channel from Reddit and bounces out after one video.

Keep in mind also that there are thousands of advertisers trying to reach thousands of different market segments and are willing to pay different amounts. Coke may have 10 ads at 10 different market segments at 10 different CPMs, and then they'll change it the next week. At the very least, every advertiser is A/B testing 2 or 3 ad buys for every ad they have and they're trying to find out where they can maximize their bang for buck. They're changing all the time trying to get their best deal.

So at the end of the day the formula is so massively complicated and dependent on things you can't control the only reasonable thing you can do is make good content that keeps people on your channel. Anything else you could do is a total crap shoot and that's the way YouTube likes it. They don't want people gaming the system and if by someone chance you figured out a way to do it, they would take notice and change the algorithm and potentially punish you for it.

Make sense?

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