What Is the CPV Model, and What Are Its Advantages?

Brands commonly use video formats in their communications to compete for audience attention. Unlike traditional text or graphic online ads, which show text and encourage users to click on a URL, video ads contain interactive content. Therefore, it is important to monetize and promote video content effectively, and cost-per-view (CPV) metrics play a crucial role in this.

In this article, I will cover everything you need to know about cost-per-view (CPV) metrics and their advantages in advertising strategy.

1. What is CPV?
2. How to calculate CPV: the cost-per-view formula
3. Maximum bid vs. actual bid
4. Advantages of the CPV model
5. Optimization and improvement of CPV campaigns

What is CPV?

The cost per mille (CPM) model is quite popular among advertisers, where payment is made for every thousand impressions, regardless of whether the viewer actually watched the entire video. Cost per view (CPV), on the other hand, offers a more effective approach by allowing advertisers to optimize their spending and achieve better results, i.e., complete video views.

With the CPV model, you won't pay for users who come across or accidentally click on your ad. Instead, you can focus on your target audience and only pay when viewers show interest in your video ad.  

A view is counted under the following conditions:

• The viewer watches at least 30 seconds of the video ad.
• They watch the entire video if it is shorter than 30 seconds.
• The viewer interacts with the ad by clicking the call-to-action (CTA) button or the accompanying banner.

According to the AIDA model, CPV is best used in the interest and desire stages of the funnel, i.e., when viewers are unfamiliar with the brand and need encouragement to take action. By using CPV at those stages, advertisers can gather an interested target audience and guide them through the sales funnel using remarketing, converting visitors into leads and then into buyers.

The CPV bidding strategy is ideal for advertisers with the following goals:

• Encourage relevant customers to take an interest in the products or services.
• Encourage potential customers to visit the website.
• Attract a wide audience using brand information.
• Increase brand awareness and reach.

To select CPV bidding for your Google Ads campaign, choose the "Awareness and Consideration" campaign objective, or create a campaign without selecting an objective. Available video campaign subtypes include Video Views and sequential campaigns, which allow you to show a set of different videos in a specific order.

How to calculate CPV: a formula

To calculate CPV, divide the total advertising cost by the total number of views. 

Example:

A business spends $10,000 on advertising, resulting in 100,000 views. To calculate CPV, follow these steps:

CPV = $10,000 ÷ 100,000 views.

Therefore, CPV equals $0.001 (or $0.1) per view. 

Maximum and actual bids per view

When setting up campaigns with the CPV model, you must set a maximum bid per view. However, analytics show an "actual bid" indicator. Let's take a closer look at what this means.

Maximum bid

The maximum cost per view is the highest amount an advertiser is willing to pay. It can be calculated based on reach estimates for the selected targeting parameters and the maximum CPV when creating a new campaign. However, this is not always the amount that is actually paid.

Please note that the maximum bid affects ad ranking.

1. Ad ranking. The higher the bid, the higher the probability that the system will display the ad.
2. Ad placement. A higher bid results in placement on more popular sites.

Setting a maximum bid is a mandatory step when creating a Google Ads campaign. You can select the maximum CPV bid for video ads when creating an ad group or campaign or set it later when managing ad groups.

Although a higher maximum bid will ensure more views, you should consider your current priority: reducing costs or getting as many views as possible.

Actual bid

Advertisers typically pay slightly less than their maximum bid because Google Ads auctions only require the minimum amount necessary to outrank other advertisers' ads. The final amount paid per view is called the actual price.

The cost per view depends on two numerical values: Quality Score and Ad Rank.

After ranking all ads, Google calculates the actual price per view for your ad. This calculation uses a formula that includes the ranking of the competing ad appearing immediately below yours and your ad's quality score.

The ad with the highest ranking wins the auction. The cost per view for that ad will be slightly higher than the cost per view for the ad that comes after it in the ranking.

Benefits of CPV

The main benefit of CPV is that advertisers only pay for users who watch the entire ad. This allows you to filter out uninterested users.

Compared to other models, the CPV model has several other advantages:

1. It offers precise control over cost per view.
2. You can determine the effectiveness of a video ad based on the number of views.
3. It attracts an interested audience that responds well to video content.

Optimizing and improving CPV campaigns 

Before optimizing your CPV campaign, you need to understand the range of views that is acceptable, given the auction conditions at launch. Follow these recommendations:

1. Measure CPV alongside other metrics. CPV alone does not provide a complete picture. Consider other metrics, such as CPM (cost per mille), CPI (cost per install), and CPCV (cost per completed view). A comprehensive approach will help you understand the aspects that are working and the ones that are not, as well as the metrics you need to optimize to achieve your desired results within your budget.
2. Optimize your video campaigns. When spending money on video advertising, it's important not to leave anything to chance. Optimize your ad targeting, landing pages, and keywords. Use relevant tags and test each campaign.
3. Create high-quality, interesting videos. If you want users to watch your videos, they need to be engaging and relevant. Focus on creating high-quality content, and test different versions with your audience to find the best option. I recommend uploading videos in different formats (square, vertical, and horizontal) and with different messages. 

Conclusions

1. In the CPV model, you only pay when a viewer watches at least 30 seconds of a video or interacts with its elements.
2. CPV enables you to focus on interacting with an interested audience, thereby improving engagement and reducing costs.
3. To calculate CPV, divide the cost of the ad by the number of video views.
4. Advantages of the CPV model include control over cost per view, the ability to determine an advertising video's effectiveness based on views, and the opportunity to attract an interested audience that responds well to video content.
5. Setting a maximum amount per view helps control costs and allocate your budget effectively. However, note that the actual price per view is usually lower than the maximum.