If you are a publisher, then you have definitely heard of the terms CPM and RPM. These are the two most common terms that are used on a daily basis to determine the ad revenue of your site. It is very important to understand the differences between the two so you can correctly calculate the revenue for your site. Let’s dive deep into what each of these terms mean and understand which is suitable to use for each case.
CPM stands for Cost Per Mille, which is 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
Simply, if a campaign has a $5 CPM, this means that the advertiser will pay $5 for 1000 copies of an ad to be displayed.
CPM is an advertiser’s metric to calculate the cost of each campaign. It is commonly used to measure the performance of a single ad unit. This metric is good to compare the quality of ads that your site is bringing in. Higher quality ad units tend to pay at a higher CPM, so the focus of the publisher is to try and capture the higher CPM campaigns out there.
eCPM stands for Effective Cost Per Mille, which is 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
This differs from CPM and is used to calculate how much value the campaign generated. This metric is a better choice when speaking about CPA and CPC campaigns and etcetera.
For example, if a Cost Per Click acquisition paid $15 per click, and it took 2000 impressions to generate a click, than the eCPM of the campaign is $15/2000*1000 which is $7.50.
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 a site’s page has $5 RPM, and there are 2 ads on that page, then the CPM per ad unit is $2.50
RPM is a publisher’s tool for measuring success 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, thus bringing in higher value advertisers along with it.
To keep things short and sweet, CPM is the measurement of the value of a single ad unit while RPM is the measurement of the cumulation of ad units on a page. To increase CPM, the publisher has to capture higher value advertisers. However, to increase RPM there are many right ways and wrong ways…
There is a trap which a lot of publishers fall into when solely focusing on raising RPM, which is filling their pages up with too many ads. Although this strategy will increase the RPM, it can damage the user experience of the site if done improperly.. This strategy can look nice in the short term, but generally it could decrease pages per session, increase bounce rate, or decrease session duration – all of which could impact the total traffic you have overall and in a circular way leave you with less inventory because of it.. Nobody wants to visit a site that has turned into a billboard, and furthermore, this generates more of an issue regarding Ad Blindness.
From the advertiser’s stand point, if they have to compete with multiple advertisers to gain the user’s attention, the ad overall will be worth less to them. This will result in a drop in CPM of the ad units as the value to the advertiser decreases due to the competition. However plenty of advertisers will still have interest in the cheaper inventory while still knowing that they will not convert well. Because of this, the CPM will experience a drop, but not necessarily the RPM.
Also from the visitor’s perspective, nobody enjoys dodging ads just to read the content on a site. You want to not only attract the visitors that are genuinely interested in the content, have them coming back in the future as well. Nobody enjoys dodging ads just to read the content on a site and this will definitely affect your site score (look out for our future article, How Advertisers Rate your Content), turning away the high value advertisers from buying your inventory.
Having well placed ad units will also increase the CPM of that unit and have a high fill rate. Fill rate is very important because you want all your inventory to be monetized and not have any remnant inventory which is just going to waste.
While keeping the number of ads to a palatable amount for your site, PubGenius’s Header Bidder technology is a foolproof way to increase your RPM. With header bidding, we have our advertiser relationships compete against each other to purchase your inventory. This competition can help ensure you are getting the most competitive price. Feel free to reach out to our team and we can provide you some revenue estimates for your site and a no commitment trial of our Header Bidder.
CPM and RPM are terms that are used frequently in the online advertising world and the slight differences between them are very important to understand.
Understanding these terms and the factors that affect them is important in uncovering how your site is performing and where to focus your efforts when making changes..
Do not hesitate to reach out to us for a consultation of your site, our AdOps team can help uncover ways to increase your site’s ad revenue.