More acronyms? Yea, we know.
Ad tech is filled with them, and they’re often confusing. CPM and eCPM are no different.
They are two monetization metrics that are commonly misused interchangeably. That’s why we’re writing this article, to clear it up for you, once and for all.
We’ll cover what exactly CPM and eCPM are, the similarities, differences, and which one is important for you as a publisher.
What is CPM?
CPM stands for “Cost Per Mille,” or cost per thousand impressions. It’s a standard metric used in online advertising to measure the cost of displaying an ad one thousand times. Advertisers pay publishers for every thousand impressions, regardless of whether or not the ad is clicked on.
For example, if an advertiser pays $10 CPM, they will pay $10 for every 1,000 impressions.
The formula for calculating CPM is as follows:
CPM = (cost of campaign / number of impressions) * 1,000
For example, if an advertiser spent $5,000 on a campaign and received 5,000,000 ad impressions, then the CPM will be $1.
($5,000 / 5,000,000) * 1,000 = $1
In other words, for every 1,000 ad impressions the advertiser will pay $1.
What is eCPM?
eCPM stands for “Effective Cost Per Mille,” or the effective cost per thousand impressions. Unlike CPM, eCPM is the overall average of all the CPMs from the various advertisers. So while CPMs measure how much each advertiser spends, eCPM measures the combined bids for your ad inventory.
For example, if you earn $100 from 10,000 impressions, the eCPM would be $10.
The formula for calculating eCPM is as follows:
eCPM = (total ad revenue / total impressions) * 1,000
For example, if you generated a total of $10,000 in revenue per 2,500,000 ad impressions, the eCPM will be $4
($10,000 / 2,500,000) * 1,000 = $4
In other words, for every 1,000 ad impressions you earned $4.
What’s the Difference between CPM and eCPM?
The main difference between CPM and eCPM is that CPM is the cost per thousand impressions, while eCPM is the revenue generated per thousand impressions. CPM is used to measure the cost of running an ad campaign, while eCPM is used to measure the revenue generated from an ad campaign.
This means that CPM is a more valuable metric for advertisers, while eCPM is a more valuable metric for publishers.
Another difference is that CPM is a fixed cost, while eCPM can vary based on the ad format, targeting, and other factors.
CPM vs eCPM Example
Let’s say you have four ad units on your homepage that you’re monetizing. Each month, these ad units generate one million impressions.
For two of the ad units (2M impressions), advertisers are willing to pay a CPM of $2. That means these units generated $4,000.
($4,000 / 2,000,000) * 1,000 = $2.
For the two remaining ad units (2M impressions), advertisers are willing to only pay a CPM of $1. That means these units generated $2,000.
($2,000 / 2,000,000) * 1,000 = $1.
In this case, your total ad revenue equals $6,000 ($4,000 + $2,000).
That means that for every 1,000 impressions that you sold, you earned an eCPM of $1.5.
($6,000 / 4,000,000) * 1,000 = $1.5 eCPM
Factors that Influence CPM and eCPM
There are several factors that influence CPM and eCPM, including:
Different ad formats have different CPM and eCPM rates. For example, video ads tend to have higher CPMs and eCPMs than display ads.
Ad rates can vary by geographic location due to differences in demand and competition.
Targeted ads tend to have higher CPM and eCPM rates than non-targeted ads.
Ad placement can affect CPM and eCPM rates. For example, ads placed above the fold tend to have higher CPM and eCPM rates than those placed below the fold.
For publishers, it is better to focus on eCPM than CPM.
eCPM provides you a wider picture of your earnings, while CPM is more specific for advertisers.
That being said, eCPM isn’t the only important metric that you need to ensure your monetization success.
Working with a Google Certified Publishing Partner (GCPP) like Adnimation is a good way to ensure you are receiving the most you can from your ad revenue.
Want to learn more? Feel free to get in touch with our team today.