CPM vs RPM: Which Metric Should Publishers Focus On?

CPM vs RPM: two of the most common metrics used by publishers to measure the effectiveness of their ad inventory. Understanding the difference between the two is critical for publishers who want to optimize their ad revenue and maximize their earnings potential.

In this blog post, we'll explore what CPM and RPM are, how they are calculated, the differences between them, and the factors that can affect them. By the end of this post, you'll have a better understanding of how these metrics work and how to use them to optimize your ad inventory. Whether you're just starting out or have been in the business for years, this post will provide valuable insights and tips to help you succeed.

So, let's dive in and explore CPM vs RPM!

What is CPM?

CPM, or Cost Per Mille, is a metric used by publishers and advertisers to measure the cost of advertising per one thousand impressions. It is commonly used to understand how much publishers can charge advertisers for displaying their ads on their websites. CPM is essential for publishers as it helps them understand the value of their website traffic and the effectiveness of their ad inventory.

How to calculate CPM?

To calculate CPM, the formula used is:

CPM = (Cost of Campaign / Total Impressions) x 1000

For example if an advertiser paid $100 for an ad that received 10,000 impressions, the CPM would be:

CPM = ($100 / 10,000) x 1000 = $10

If you'd like to learn more about CPM, be sure to check out our blog post "What is CPM?" for a detailed breakdown of this metric. Now, let's move on to RPM and explore how it differs from CPM.

What is RPM?

RPM, or Revenue Per Mille, is a metric used by publishers to measure the revenue generated per one thousand pageviews. It is a key metric used by publishers to evaluate the overall performance of their ad inventory and understand how much revenue they are generating per pageview. RPM is essential for publishers as it helps them understand the performance of their overall ad setup per pageview. This takes all ad units and ad formats on the page into account. In contrast, CPM helps publishers understand how much advertisers are willing to pay for impressions from a specific ad unit.

How to calculate RPM?

To calculate RPM, the formula used is:

RPM = (Estimated earnings / Number of page views) * 1000

For example, if a publisher earned $500 from 5000 pageviews, the RPM would be:

RPM = ($500 / 5000) * 1000 = $100

Now that we've covered RPM let's explore the differences between CPM vs RPM in more detail.

CPM vs RPM - What is the Difference?

Why is My RPM Higher Than My CPM?

Generally, RPM tends to be greater than CPM. This is because RPM includes the revenue from all ad units on a webpage, while CPM is calculated based on the number of impressions for a single ad unit.

For example, a user lands on a webpage containing four ad units. Three of the units are high up the page and quickly come into view. These units have a high viewability score, so advertisers have learned that an impression from these units is valuable. As a result, there is a lot of competition to buy impressions from these units, and they each achieve a CPM of $5. One other unit is placed at the bottom of the page. The user rarely sees this unit and has a low viewability score. As a result, advertisers have learned that impressions from this unit are not valuable. Competition is low, and this unit only receives a CPM of $0.20.

In this example, we can see the CPM of these units ranges from $0.20 to $5. In contrast, the RPM for the whole page is $15.20 since it is the sum of the CPMs of all ad units on the page.

The discrepancy between CPM vs RPM can lead publishers to believe that there is an issue with their ad setup. However, if appropriate strategies are employed to enhance RPM, there is no cause for concern. Snigel provides a dedicated adops expert to each publisher we work with. This expert continuously works to improve your RPM and CPM. To find out more, contact us here.

In this section, we'll explore how publishers can optimize RPM and CPM to increase their earnings potential.

Optimizing RPM and CPM:

To optimize both RPM and CPM, publishers can focus on improving their ad placement, ad formats, price floors, and audience targeting. For example, placing ads above the fold, using responsive ad units, lazy loading, and segmenting your audience can all increase both metrics. Additionally, experimenting with different ad formats, such as interactive ad units and native video, can also increase RPM and CPM.

11 Factors That Affect Your RPM and CPM

There are various factors that can impact a publisher's RPM and CPM. In this section, we'll discuss each of these factors in more detail and highlight their impact on RPM and CPM.

1. Ad Placement:

Ad placement is one of the most critical factors that can impact RPM and CPM. Ads placed in visible and prominent locations tend to perform better than those that are hidden or difficult to find. Publishers should experiment with different ad placements to find the optimal locations for their ads. Ad placements with a high viewability will attract higher bids from advertisers which will positively impact RPM and CPM.

2. Ad Format:

Different ad formats have varying RPM and CPM rates. Display ads typically have lower rates than video or native ads. Publishers should experiment with different ad formats to find the ones that work best for their website.

3. Ad Quality:

Low-quality ads or those that are not relevant to the audience can result in lower revenue. Publishers should ensure that the ads displayed on their websites are of high quality and relevant to their audience.

4. Geographic Location:

Advertisers may be willing to pay more to target visitors from certain regions or countries. Publishers should consider their audience's location and target ads accordingly. Users from tier 1 countries generally generate higher CPM and RPM. Check out our AdSense revenue calculator for a breakdown per GEO and per content category.

5. Niche or Topic:

Websites that cover popular and lucrative niches tend to have higher rates than those in less popular or saturated niches. Publishers should consider their website's niche and topics and target ads accordingly..

6. Seasonality:

Certain seasons, such as the holiday season, tend to see higher ad spend and thus higher RPM and CPM rates. Publishers should consider seasonality when optimizing their ad inventory.

7. Traffic Volume:

Websites with higher traffic earn more revenue than those with lower traffic. Publishers should focus on increasing their website's traffic to increase their earnings potential.

8. User Behavior:

User behavior, such as ad click-through rates and bounce rates, can impact RPM and CPM. Websites with engaged and active users tend to have higher revenue. Publishers should focus on engaging their users to increase their earnings potential. Many publishers improve in this area by creating valuable content that keeps users on the website for longer.

9. Ad Block Usage:

Websites that have a high percentage of users who block ads may see lower rates. Publishers should consider using an anti-adblock solution to increase their revenue potential.

10. Web Cookies:

Web cookies are small files that are stored on a user's device to help track their browsing behavior. They can have a significant impact on RPM and CPM as they provide advertisers with valuable user data that can be used to target ads more effectively. Advertisers can use cookies to track user behavior and tailor their ads to their interests, increasing the chances of ad clicks and conversions. However, with the upcoming deprecation of third-party cookies, publishers will need to rely on other strategies like first-party data and other third party cookie alternatives to continue delivering personalized ads that generate high CPMs and RPMs.

11. Price Floors:

By setting high price floors, publishers can protect their ad inventory from bid shading, a practice used by buyers to purchase ad inventory at the lowest possible price. Snigel’s AI price floor optimizer updates price floors every hour to ensure the publisher’s inventory is protected and high CPM and RPM are achieved. Contact us to find out more.

In conclusion, tracking RPM and CPM regularly is crucial to identifying trends and making data-driven decisions. Many external factors or setup issues can impact your rates. By considering and optimizing these factors, publishers can increase their earnings potential. Snigel offers a range of programmatic advertising services, including header bidding, anti-adblock revenue recovery, and a consent management platform, to help publishers optimize their ad revenue.

To learn more about how Snigel can help you optimize your ad revenue, get in touch to speak with an ad ops expert. Don't leave money on the table - optimize your ad revenue today!