Advertising acronyms can easily become overwhelming and confusing, so today we’re only going to talk about one: eCPM or effective cost per mille. This is essentially the same thing as RPM or revenue per thousand impressions, as it’s what the publishers are paid per thousand impressions.
If you are running a CPM campaign, where advertisers are paying for impressions, the CPM and eCPM are the same number. However, if you’re running something else, like CPC (Cost per Click) or CPA (Cost per Action), there are many more calculations that need to be done to determine your eCPM.
An eCPM Example
For example, for a CPC campaign, you’ll need to look at the ad impressions over a certain time period, the clicks per ad over that same time period, and the CPC rate. You’ll need to multiply the number of clicks and the CPC rate, which will give you the total revenue. You’ll also want to divide the total number of impressions by 1,000, since the ad rates are measured in thousands, to get the number of “thousands” advertisers will be paying for. Finally, divide your total revenue by your “number of thousands,” and you’ll get your eCPM value.
# of Clicks x CPC Rate = Total Revenue
Total # of Impressions/1000 = Number of “thousands” of advertisers will pay for
Total Revenue/# of Thousands = eCPM
Let’s look at that with numbers. Let’s say you have 1 million impressions on a particular ad on one day, that ad was clicked 5,000 times, and the CPC rate was $0.50.
So, multiply 5,000 and $0.50 to give you $2,500 in total revenue. One million impressions divided by 1,000 is 1,000 sets of 1,000 – that is, if an advertiser was payer per thousand impressions, they would have to pay for 1,000 sets of thousands. Finally, divide $2,500 by 1,000, which gives you an eCPM of $2.50.
5,000 Clicks x $0.50 = $2,500
1,000,000 Impressions/1000 = 1,000 “thousands” the advertisers will pay for
$2,500/1,000 Thousands = $2.50 eCPM
Why Does This Matter?
In this example, the advertiser agreed to pay $0.50 to the website publisher per individual click on their ad, since that was the CPC rate. In order to get the same revenue in a CPM campaign, the publisher would need to have a $2.50 CPM rate, since the eCPM rate was $2.50. The publisher’s total revenue from this particular campaign was $2,500. In order for the publisher to make $2,500 from a CPM campaign, the CPM rate would have to be $2.50.
eCPM is a great tool for comparing your revenue if you have different types of campaigns running on your website simultaneously. Once you calculate all of your CPC and CPA campaigns and revenues and convert into eCPM, you can easily see which ads are generating the most revenue. This is also helpful for advertisers, as they can make changes to campaign strategies based on eCPM figures to maximize their advertising budget.
If you’re looking to expand the ads on your website today, fill out the form here on our website. Here at The Moneytizer, we’re looking forward to helping you make monetize your website and visitors.