One skill that is universally relevant to all publishers, regardless of programmatic solutions and technologies they are using already or planning to adopt, is being able to estimate potential ad revenues. For a publisher, the best way to maximize earnings from programmatic banners and other types of programmatic ads is to offer the ad inventory for sale through a number of various SSPs (supply-side platforms), ad exchanges and ad networks.
Even though you can find multiple ad revenue calculators online, they are not always effective and can be confusing. As programmatic platforms tend to rely on different metrics and pricing models, learning about those is a key if you want to be able to estimate ad revenues with high enough accuracy.
Key metrics and pricing models
- Cost per click (CPC)
Cost per click is probably the most popular and well-known digital advertising metric. CPC is the average revenue generated by every click on programmatic banners placed across your web properties.
Calculating average cost per click is fairly easy. Take the total ad revenue generated by your websites over a specific time period and divide it by the total number of clicks on advertising over the same period. Obviously, the actual CPC would depend on multiple factors, such as the market segment, audience location and quality of ads, but the average CPC in general across industries would be somewhere between $1 and $2.
- Clickthrough rate (CTR)
Clickthrough rate is the second fundamental metric. CTR is the number of times your banners are clicked per every 100 served impressions. So if you want to maximize your ad revenue, increasing CTR is crucial.
CTR is calculated by taking the total number of clicks received by the ads, dividing it by the number of impressions, and multiplying the number by 0.01. So, for example, if your ads had 30 clicks per every 1000 impressions, the CTR would be 3%. According to Google’s data, today the average CTR is 1.91% for a search ad and 0.35% for a display ad.
- Daily page impressions
Daily page impressions, or the average number of visitors a website receives in a single day, is also an important figure in programmatic ad revenue calculations. This metric is quite straightforward and doesn’t require much calculation. In order to get the average daily page impressions, just take the total number of impressions for any time period and divide it by the number of days in this period. Naturally, it is recommended to calculate daily page impressions based on data over a long-time period (a year or more) to minimize the effect of potential short-term spikes or declines in traffic.
We had a whole separate article comparing CPM, RPM, and eCPM, and explaining how these three metrics are different from each other.
Here’s a quick recap.
- Cost per mile (CPM)
CPM (cost per mile) stands for cost per thousand ad impressions. Or, in simpler terms, it’s the amount an advertiser will have to pay to show their ad 1,000 times. As you can see, CPM is the metric designed primarily for advertisers, not publishers. But it also is the default metric used by programmatic advertising platforms and solutions, such as SSPs and DSPs, when presenting their services to advertisers.
Based on the time when the campaign was running, programmatic solutions calculate the CPM, dividing the amount of money spent on the campaign in total by the number of impressions delivered, and then dividing that by 1,000.
- Revenue per mile (RPM)
RPM stands for revenue per thousand impressions, and it’s primarily a publisher-facing metric. It is used to indicate how much a website or a publisher earns in every 1,000 times when an ad is shown to users on each specific web property.
Similarly to the CPM metric, RPM is calculated by dividing the amount of money the publisher earned by each 1,000 ad impressions delivered.
- Effective cost per mille (eCPM)
eCPM stands for “effective” CPM or effective cost per mille. This metric is used to calculate a general CPM regardless of what media buying method is used by an advertiser or a publisher. So even when the advertiser is using bidding models such as CPA (cost per acquisition or action) or CPC for some programmatic advertising campaigns, the eCPM metric can be applied as a universal denominator to understand the size of total revenues and compare them to overall goals and objectives. In simple words, eCPM converts all non-CPM measurement methods into a CPM calculation model.
- Cost per acquisition (CPA)
CPA, or cost per acquisition, is the metric used to measure how much you as a publisher earn each time when a click on an advertiser’s programmatic banner ends up with a conversion. Online purchases, as well as app downloads or website signups are all types of conversions or acquisitions.
CPA calculation is also quite simple and similar to CPC. To calculate CPA, take the total ad revenue generated by your websites over a specific time period, and divide it by the total number of acquisitions (conversions) over the same period.
Which pricing model to choose as a publisher
Due to this high variety of metrics and pricing models, estimating ad revenues for a publisher can be confusing. When it comes to advertisers projecting general costs of programmatic ad campaigns, they most commonly rely on CPC or CPM as basic models, depending on their needs and technologies used.
As a publisher, you should be familiar with all of these models to be able to estimate revenues based on the metrics provided by specific programmatic platforms you are working with. For your own average ad revenue calculations, eCPM would be one of the most effective metrics. Calculating eCPM will allow you to understand the average revenue across different programmatic platforms and channels.
Looking for accurate ad revenue estimations but don’t have time to learn how to apply different pricing models and metrics? Outsource this headache along with all the other challenging aspects of your ad operations to professionals with proven expertise in the ad tech field.
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