Look ma, a new report is circulating which suggests there is good money to be made in online video. The conclusion is that CPM’s for video are high. For the noobs, CPM means cost per thousand – how much money an advertiser pays for every 1000 views, for instance. According to the report the average $’s range from $40 per thousand on pro long-form content, to $20 for short-form pro content, down to $17 for UGC.
Thus, if you have a million views per week, and sell ads for a $20CPM, for instance, that’s $20k per week and about $1,000,000 per year.
If you can then grow your audience size to 2M per week, without a lot of additional resources, thats obviously twice as much, or $2M/year for that one set of views.
These CPM’s are similar to what is sold on TV in the U.S. A $25 CPM for a TV show is okay. The only problem of course is the amount of money it takes to produce a TV show cuts into the profit margins when compared.
The original epiphany that I had personally when I thought of Rocketboom, was exactly this simple formula. If TV shows are getting a CPM worth $25 then a lot of online video will be greater than $25 because the advertising can be targeted, searched, tracked and played on demand.
A production that costs almost nothing to make, reaching hundreds of thousands or millions of people can thus lead to a massive profit margin. Accordingly, TV Week refers to web tv as a silver lining.