
# The YouTube CPM equation

![CPM Equation](images/equation_cpm.png)

## CPM

Youtube calculates a creator's earnings by using the formula `Views / 1000 * RPM` where **RPM** stands for revenue per 1000 views. **CPM** is the cost per 1000 views to advertisers. `RPM + Google's Cut = CPM`. Both **RPM** and **CPM** are the visible in Youtube Video and Channel Analytics. [Google's Explanation](https://support.google.com/youtube/answer/9314357?hl=en)

## Average View Duration

**AVD** is how long the average viewer watches a video. Ads are shown at the beginning and middle of videos. Viewers are more likely to be show a pre-roll ad if they haven't seen another ad recently and are more likely to be served a mid-roll ad if they are watching for a longer period of time. The longer the **AVD** the more ads can are delivered.

If a viewer watches just 30 seconds they may have been shown a pre-roll ad and that's it. If they watch 10 minutes they may have seen a pre-roll and a mid-roll ad. The more ads shown, the higher the **CPM**, because **CPM** is calculated for each view. This relationship between **AVD** and **CPM** is often confused when deciphering a channel's Youtube Analytics.

## Audience

Adsense (Google) prices ads through an auction, so not all ads are priced the same. Companies bid on ads shown to specific demographics. The more valuable the demographic the higher the cost to display to a specific audience.

A channels audience is the demographics of the viewers. If a Software Engineering channel like [t3․gg](https://www.youtube.com/@t3dotgg) creates a gaming video the audience is primarily high earners, so advertisers will pay more to show ads to that audience. The opposite is true, if a gaming channel creates a software engineering video the audience is mainly children, so advertisers will pay less to show ads to that audience.

The Audience a channel brings to a video is important to the earning potential of a video.

## Content Topic

The content of a video is important to advertisers. If a video is about a specific product or service a company in that space will bid higher to show advertisements on that video. An example is a video about "how to fix a clogged toilet" may have ads from local plumbing companies.

**Audience** and **Content Topic** share similarities, yet the fundamental distinction lies in the targeting approach: advertisers can choose to target based on audience demographics or the specific content of the video.

## CPM Equation

The rate at which a video earns is determined by three specific variables. All other factors essentially boil down to these three. To boost their earnings **CPM** and, consequently, their revenue **RPM**, channels should aim to improve certain key metrics without compromising on others.


Every variable Youtube uses to determine earnings paid to creators

The YouTube CPM equation explained