Reference library · Inventory pricing
CPM Compression
CPM compression is the decline in average CPM across a market or inventory segment that occurs when supply growth outpaces demand growth, independent of any single buyer's negotiation. It shows up as a falling market-clearing price over successive periods for comparable inventory and audience. Planners track it to distinguish a genuine market-wide price drop from savings they actually negotiated.
Formula
Worked example
A mid-size European market's open-exchange video CPM averages €4.20 in Q1. Two new SSPs bring additional publisher inventory online, and by Q2 the average CPM falls to €3.65 with audience and format held constant. Compression = (4.20 − 3.65) / 4.20 x 100 = 13.1%, meaning the same €50,000 budget now buys roughly 13,700 impressions in Q2 versus 11,900 in Q1 at Q1 rates.
How it is used
Planners compute this quarter over quarter or month over month within a stable channel and audience definition, then compare the rate against category benchmarks to judge whether their own buy is keeping pace with the market or lagging it. It is used to time flighting into periods of high supply (end of quarter, new inventory launches) and to set realistic CPM targets in upcoming plans rather than anchoring to last year's rate. The recurring mistake is measuring compression across periods where the audience mix, format, or viewability floor also changed, which produces a rate that looks like market compression but is actually a shift in what was bought.
The common mistake
Practitioners credit a falling CPM to their own negotiation when it is market-wide compression, so isolate it by holding audience, format, and placement constant across the comparison periods.