CPM, RPM, and eCPM - Formulas and Calculations
July 9, 2020
To keep things short and sweet:
CPM – Cost Per Mille
Cost of the campaign / Number of total impressions * 1000
eCPM – Effective Cost Per Mille
Cost of the campaign / Actual number of total impressions *1000
RPM – Revenue Per Mille
Estimated earnings / Number of page views * 1000
If you are a publisher, then you have definitely heard of these common terms CPM, RPM, and eCPM.
It’s important to understand the differences between the two so you can correctly calculate revenue.
Let’s dive deep into what each of these terms mean and understand how these metrics matter to you.
CPM
CPM stands for Cost Per Mille – The measurement of the cost of an ad the advertiser has to pay for each 1,000 views of an ad.
Cost of the campaign / Number of total impressions * 1000
If a campaign has a $5 CPM, the advertiser will pay $5 for 1000 copies of an ad to be displayed.
CPM is commonly used to measure the performance of a single ad unit. This metric is great indicator of the quality of ads that your site is bringing in. Higher quality ad units tend to pay at a higher CPM.
eCPM
eCPM stands for Effective Cost Per Mille – the measurement of the cost of an ad the advertiser has to pay for the total amount of ads actually displayed.
Cost of the campaign / Actual number of total impressions *1000
eCPM is used to calculate how much value the campaign generated. We commonly use this when looking at the effectiveness of our optimizations across multiple variables.
For example, one ad is generated $6.50 over 500 impressions, and the second generated $9.00 over 900 impressions. We see the the first ad comes out to a $13 eCPM and the second one is $10 eCPM. It is clear now that the first ad is generating you more money.
RPM
RPM stands for Revenue Per Mille, which is the measurement of the profit the publisher will recognize from each campaign.
Estimated earnings / Number of page views * 1000
If your site’s estimated earnings are $20,000
RPM is a tool for measuring the value of each page and should be the focal point when calculating a site’s financial health. It is better to have a higher RPM as this means your web property is more valuable.
Should I just fill up my page with ads to get the most revenue then?
There is a trap which many publishers fall into when focusing on raising revenues, which is filling their pages up with too many ads.
Although this strategy will increase the RPM, it can damage the user experience if done improperly. Typically, a lot of ads is not appealing for readers to see, therefore decreasing pages per session, increasing bounce rate, and decreasing session duration.
So, from a visitor’s perspective, dodging ads just to read the content on a site is not enjoyable. The goal is to not only attract the visitors that have genuine interest in the content, but also to have them keep coming back. Nobody wants to visit a site that has turned into a billboard, and furthermore, this generates more of an issue regarding Ad Blindness.
And, from the advertiser’s stand point, if they have to compete with multiple ad units to gain the user’s attention, the ad unit overall will have less value for them. Plenty of advertisers will still have interest in the cheaper inventory while knowing that they will not convert as well as a high value ad unit. Because of this, the CPM can experience a drop, but not necessarily the RPM.
The Interactive Advertising Bureau has provided a full document on the ins and outs of all things advertising. Definitely check this out if you are looking for a comprehensive guide.
Be sure to compare the performance of your ad units based on CPM, RPM, and eCPM, as well as always adjusting to try to increase the value of your pages.
Feel free to reach out to our team of experts for an evaluation of your ad inventory.
CPM, RPM, and eCPM Conclusion
I hope that now you have a deeper understanding of CPM, RPM, and eCPM as well as the factors that affect them. Understanding and utilizing these terms is important in uncovering how your ads are performing and where you should focus your efforts to improve your site.
We’d love to hear from you! Get in touch today to see how pubGENIUS can increase your site’s revenues!
