If you’re a publisher, you’ve likely heard the terms RPM and CPM used as metrics to measure ad revenue. In fact, they are often used interchangeably.
But there is a clear distinction between the two, and as a publisher, it’s important to understand the difference.
In this article, we’ll clarify the meaning of the two terms and explain which one you should be using to analyze your ad revenue.
RPM
RPM, an acronym for ‘revenue per mille’ or ‘revenue per thousand’ (mille is Latin for thousand), is a measure of how much revenue a publisher generates from 1,000 pageviews.
Simply put, the metric tells you how much money you can expect to generate for every 1,000 pageviews you receive.
Calculating RPM
The formula for calculating RPM is as follows:
RPM = (estimated earnings / number of pageviews) * 1,000
For example, if your estimated earnings are $5,000 from 5,000,000 pageviews, then your RPM will be $1.
($5,000 / 5,000,000) * 1,000 = $1
In other words, for every 1,000 pageviews you can expect to earn $1.
CPM
CPM (cost per mille) is the amount an advertiser pays to have their ad shown 1,000 times.
This metric is used by advertisers to analyze the effectiveness of their campaigns.
Calculating CPM
The formula for calculating CPM is as follows:
CPM = (cost of campaign / number of impressions) * 1,000
For example, if an advertiser spent $2,500 on a campaign and received 2,500,000 ad impressions, then the CPM will be $1.
($2,500 / 2,500,000) * 1,000 = $1
In other words, for every 1,000 ad impressions the advertiser will pay $1.
Why RPM is Generally Higher than CPM
As explained above, RPM measures pageviews, which accounts for all the ad units on the page – even ones that don’t come into the user’s viewport.
On the other hand, CPM accounts for ad impressions, meaning that if an ad didn’t come into the user’s viewport, the advertiser won’t get charged.
For example, imagine a webpage that has three ad units per page. Even if one of the three ad units is below the content and doesn’t always get served, the RPM still accounts for the whole page (three ads), whereas the CPM only accounts for the two ads that received the impressions.
Which One Should Publishers Use
As a publisher, you should be using RPM to assess your ad revenue as the metric is geared towards you.
That being said, it’s also important to keep an eye on the CPM because RPMs don’t tell the full story. RPMs don’t account for user experience and viewability because RPMs are based on all of the page’s ad units regardless if they received impressions or not.
On the other hand, CPM is directly correlated to the ad quality because it measures impressions. So while the RPM and CPM will not be the same, it’s important to measure the CPM to ensure that you have quality ads on your page.
At the end of the day, if people don’t click on the ads on your page, advertisers will stop paying to use your ad inventory and your RPM will tank.
Bottom Line
As a publisher, it’s important to understand the difference between RPM and CPM. RPM is the amount of money that you actually earn from displaying ads on your site, while CPM is the amount of money that an advertiser is willing to pay for your ad space.
The main metric that publishers should use to gauge their ad revenue is RPM, but it’s important to keep an eye on the CPM as well because it ultimately affects the RPM.
Sounds confusing? You’re not alone.
Join the hundreds of publishers who are boosting their RPMs and ad revenue with Adnimation. Get in touch with our monetization experts and see how we can help you maximize your RPMs and revenue potential.