eCPM vs CPM - both are the two common metrics in the ad tech industry. Sometimes used interchangeably, these metrics are very different from one another.
Publishers often get confused between CPM and eCPM. Mainly because they don't know the difference, however, both metrics are highly beneficial once you know the difference and use case for each of them within the programmatic advertising landscape.
Let us shed some light on the difference between eCPM vs CPM and eliminate all the confusion with this blog post.
What is CPM?
CPM stands for 'Cost Per Mille' or cost per 1000 impressions.
It is an advertiser-centric metric. Meaning CPM is used by advertisers when they set up the budget for their ad campaigns. CPM is the rate advertisers are willing to pay for 1000 ad impressions on a publisher's ad units.
How to calculate CPM?
Advertisers start with a budget when they set up ad campaigns. Next, they choose the audience they wish to target. Most advertiser-side ad networks can show the number of ad impressions they might reach based on their selected audience demographics.
Here is an example:
Impressions (audience): 1,000,000
Then, the CPM to pay (3000/1000000)*1000 = $3.
Every publisher selling their inventory for $3 or less would be able to show this advertiser's ads.
What is eCPM?
eCPM stands for effective cost per mille. It is a key metric for publishers that reflects ad performance through how much money publishers make for every 1000 impressions.
eCPM is often used to predict future earnings for publishers.
How to calculate eCPM?
Let's assume you, as a publisher, made $1200 in a day, and your website served 300,000 impressions that day.
Then your eCPM should be = (1200/300000)*1000 = $4.
If things go the same for the next few days, you should be able to sell your ad impression at an average of $4 for the coming days.
eCPM vs CPM - How To Convert From An Advertiser To A Publisher Metric?
Let's use another example to understand how CPM converts into eCPM for publishers.
Suppose you, as a publisher, got connected with an advertiser via an ad exchange. The advertiser is willing to buy some fixed number of impressions at a fixed price - a guaranteed deal, perhaps.
The advertiser agreed to pay $5000 for 4,000,000 impressions on your site.
This means they will pay you at $ (5000/4000000)*1000 = $1.25 CPM rate.
But this doesn't mean you will get the entire $5000 amount. Your ad exchange would deduct their platform fees. Let's assume it's 15% of the total budget (or $750).
This means you will get $5000 - $750 = $4250 for 4,000,000 impressions.
Then your eCPM should be $(4250/4000000)*1000 = $1.0625.
While the advertiser paid at a $1.24 CPM rate, you receive $.10625 eCPM. Hence CPM and eCPM should not be used interchangeably. When you are negotiating a direct deal, keep this difference in mind.
eCPM vs CPM: Comparison Table
|Full Form||Effective Cost Per Mille or Effective Cost Per Thousand Impressions||Cost Per Mille or Cost Per Thousand Impressions|
|Formula||(Total ad revenue / Total ad impressions)*1000||(Total campaign budget / Total ad impressions)*1000|
|Purpose||Publishers used eCPM to measure their earnings per 1000 impressions and predict their income.||Advertisers use CPM to compare prices of various publisher inventories and bid a fair amount.|
Why is eCPM useful for publishers?
Compare site performance
If you are a publisher operating various sites and apps, eCPM is a great metric to compare the performances of all digital assets.
eCPM tells how much you make per thousand impressions for one site vs. another. Based on this information, you can make improvements to the other one.
Compare page performance
Just like a site, you can also compare the performance of a particular page. Based on this data, you can check which keywords generate more revenue.
Moreover, you can look at ad placements and formats on the high-earning eCPM pages - then replicate the same for the rest of the pages.
Compares Various Ad Platforms
If you are testing two or more ad platforms to pick the best one, then eCPM should be your key metric.
Use eCPM generated from each ad platform to compare the ad performance.
Set Floor Prices More Effectively
Advertisers bidding behavior change as the market change. During the Christmas season, advertisers often increase their ad spending. However, in other months, ad spending is not that high.
Monthly eCPM data can show you these changes, based on which you can update the floor price (and avoid serving unfilled impressions).
A Universal Indicator
If you are selling inventory based on clicks, subscriptions, or any other user action, you can still use eCPM as a key revenue metric.
Moreover, eCPM is used by Google and other ad platforms to show you your average earnings.
Why Is CPM Useful For Publishers?
Negotiate Direct Deals
If you are directly working with advertisers, you need to know their metrics to close the deal. Knowing the difference between CPM and eCPM would set the right expectation - given a percentage would be charged by intermediary parties (such as ad servers or an ad exchange like Google AdX).
Learn more about different types of programmatic deals in our programmatic advertising guide.
Make Money Directly From Monthly Traffic
CPM is purely based on impressions (or traffic) - unlike eCPM, which can be an average of all kinds of deals - CPC, CPL, etc.
If you are a publisher focused on CPMs, you need to work on traffic to increase income. It narrows down your goal and helps you focus on one thing at a time.
You can see which advertisers are spending the most on your inventory. Based on this data, you can contact them directly and ask them if they are interested in direct or guaranteed deals.
Similarly, CPM rates can help you negotiate a fair deal by showing them how much various advertisers pay with header bidding auctions.
Just like advertisers, you can also see geos that are getting you the best CPM rates. This information can further be used to know about the audience and create more targeted content. You can find a detailed breakdown of which countries belong to which goes in this AdSense revenue calculator tool.
How to increase eCPM and CPM?
Since eCPM and CPM are interdependent, let's discuss some general tips to increase your ad revenue:
1. Increase your traffic
The number of people visiting your site is directly related to the number of impressions. Therefore, higher traffic means higher impressions which means more revenue.
One of the best ways to increase traffic is by optimizing your content for search engines. You can start by improving the quality of content - revamping all old posts. Next, focus on page load time and user experience, search engines (such as Google) are known to put fast pages on the top versus slow-loading pages.
2. Work with high-paying ad platforms
You need great tech, more buyers, access to Google MCM, and a team of ad ops experts working to improve your ad stack. All of this ensures your ad inventory is in the best hands.
Snigel is an ad tech platform that has helped publishers increase their ad revenue by an average of 57% with AdEngine. Get in touch to learn more about how we can help you get the best CPM and eCPM rates on the market.
3. Test ad formats, ad campaigns, content, and everything
Testing is the key to increasing ad revenue. Ad tech is an ever-changing industry - what worked a few months ago might not work today. Moreover, your audience is pretty good at ignoring ads if they see the same ad placements every time they open the page (aka banner blindness).
Because of all these reasons, testing and finding the best ad unit, ad placement, and ad campaign are very important.
Publishers must understand eCPM and CPM as key metrics in the ad tech industry. On one side, CPM helps you understand the advertiser side of the business and how they look at ads and ad inventory. On the other side, eCPM helps you compare performance based on your website, ad platforms, ad formats, and more.
With Ad Ops experts and a header bidding solution like Snigel's AdEngine, you can ensure that you get the highest CPM and eCPM rates on the market. Contact us here to find out more about our services!