Advertising is full of acronyms, and we talked about a handful of different words and phrases that are unique to this industry in our definitions posts . One that we didn’t already cover, though, is RPM.
RPM is Ad Revenue per Thousand Impressions
To calculate RPM rate, divide your estimated earnings by your number of page views and multiply that answer by 1000. RPM is a page-based rate. Your RPM will be higher if you have five ads on a page than if you had one.
Formula: RPM = (Estimated earnings / Number of page views) * 1000
($180 earnings/45,000 impressions) *1000 = $4.00
What’s the Difference Between RPM and CPM?
That is an excellent question. CPM, or cost per thousand impressions, is an ad unit rate. It is the bottom-line price that advertisers pay when their ad is shown 1,000 times.
RPM, though, is based on the total number of ads on any given page. Let’s look at this more in-depth with some made-up numbers. On a five-ad page, for example, we’ll pretend you earn $10 in RPM. If you have five ads on that page, that comes out to a CPM of $2 per ad unit. ($10 RPM/5 ads on the page = $2 per ad unit) If you just look at numbers, not the labels that go with them, $10 sounds a lot better than $2, doesn’t it? In reality, though, those rates are the same for that five-ad page.
RPM vs CPM in the Industry
Google uses RPM more than anyone else. In fact, they don’t use CPMs at all, which is a little misleading. Since advertisers are charged in CPMs, it would make sense if publisher revenue was shown in CPMs as well. Unfortunately, Google prefers to show RPMs, likely because that number is usually bigger. But the truth is, it doesn’t necessarily tell you everything you need to know.
The main reason to understand the difference between RPM and CPM is if you’re running advertisements from multiple ad networks. Google will give you reports in terms of RPM whereas most other networks measure in CPM. Your RPM will almost always be higher than CPM, based on how the math works out above. If you use multiple networks, watch the units of measurement your reports use.
Here at The Moneytizer, we work on a CPM basis. If you’re looking to take your website ads to the next level, let us know – we’re happy to help!