eCPM vs CPM: Everything You Need to Know
eCPM and CPM parameters are essential for all the publishers as they can assess the performance of several metrics through these monetization parameters. If you are new to the advertising world, you can get overwhelmed by understanding the key differences between the terms. So, to avoid confusion and save your time we have prepared an eCPM vs CPM comprehensive guide. You will get detailed information on all the aspects of the terms like definition, formula, calculation way, the importance of both parameters, etc.
Moreover, we will offer complete differences between them to help you understand the formulas with an example of eCPM and CPM. So, without any further ado, let us dive into the details.
What is eCPM?
eCPM (effective Cost Per Mille) refers to the effective cost per thousand impressions. It is an important metric for the publishers as they use it to get the value for revenue generated from a thousand impressions of the ad campaign. Moreover, it helps them to measure the performance of their inventory that is sold through various channels and models.
eCPM allows you to calculate the combined average of all bids put forth by all your advertisers for your total ad impressions. It helps the publishers to learn what they can earn through selling their inventory with respect to all their bidding models. Higher eCPM value will result in higher total ad revenue for the publisher.
Let us understand the eCPM formula with the help of an example.
How To Calculate eCPM With The eCPM Formula?
The eCPM value is calculated when you take the effective cost, divide it by the total number of ad impressions, and then multiply the result by 1000.
eCPM Example
Let us assume that the total revenue generated by the ad campaigns is 20$ and total impressions are 2000. With the help of the eCPM formula, the value comes out to be 10$. This means that the publishers will be able to earn 20$ across all the channels
What Is CPM?
CPM or Cost Per Mille means the cost that advertisers have to pay for a thousand impressions. In simple words, it refers to a fixed price that is paid by the advertisers for 1000 impressions of the ad. The CPM value is high for a website that attracts more valuable traffic. This means, that if the publisher is able to attract more traffic, then he will generate more revenue with a high CPM value.
Let us understand the formula of terms and then understand it with the help of an example.
How To Calculate CPM With CPM Formula?
In this CPM formula, the value is calculated by dividing the total cost of an ad campaign by the number of ad impressions and then multiplying the result by 1000.
Let us understand it with the help of an example.
CPM Example
Let us assume that the advertiser budget for the ad campaign is 30$ and the ad is getting 3000 impressions. So, the CPM value according to the CPM formula will become 10$. This means that the advertiser will be ready to pay 10$ for every thousand impressions of the ad to the publisher.
Difference Between CPM And eCPM?
Here is the complete difference between CPM and eCPM
| Aspect | CPM | eCPM |
| Definition | The cost per 1,000 ad impressions. | The estimated earnings per 1,000 ad impressions. |
| Focus | Measures the cost of ad delivery. | Measures the overall revenue performance per 1,000 impressions. |
| Formula | CPM = (Total Cost / Total Impressions) x 1,000 | eCPM = (Total Earnings / Total Impressions) x 1,000 |
| Type of Metric | Expense metric for advertisers. | Revenue metric for publishers. |
| Usage | Used by advertisers to understand the cost of advertising. | Used by publishers to assess ad revenue and compare ad performance. |
| Incorporates Multiple Revenue Models | No, CPM only considers impression-based revenue. | Yes. The eCPM multiple revenue models |
Why Are eCPM And CPM Essential For Publishers?
eCPM
Excellent comparison tool
- Site Performance
Being a publisher, you have to operate several sites and apps. Well, you can use the eCPM formula to calculate the value for all of them and compare the performance of all your digital assets. You will be able to determine the amount you are making per thousand impressions on your all sites and apps. With this value, you can adjust your strategies to grow your revenue on all the digital assets.
- Ad Platforms
You can use this metric to compare different ad platforms and pick the one that will cater to your needs. You can calculate the value of eCPM for all of them and then compare it to pin down your best option. You can refer to the “How to Calculate eCPM” section above to get the formula.
- Page performance
You can compare the performance of different online pages and use the information to pin down the keywords that are generating the maximum revenue for you on a particular page. You can use this further to optimize your page. You can adjust the page layout, content, and placement of ads to generate higher revenue.
Revenue Maximization and Diversification
eCPM will help you make data-driven decisions to maximize your ad revenue. You can allocate your resources to the most profitable areas and adjust their content or ad strategies to boost eCPM.
Moreover, eCPM can help you explore different monetization strategies, such as balancing CPM and CPC ads. Moreover, you can experiment with new ad formats and pick the one that will generate better results at the end of the day.
Pricing Strategy
You can use eCPM to set pricing strategies for your ad inventory. By understanding the effective revenue, you are earning per thousand impressions, they can set competitive prices for advertisers while ensuring they meet your revenue goals.
CPM
Creates Money From Monthly Traffic
Unlike eCPM, CPM is calculated by focusing on impressions purely. eCPM takes an average of other models to calculate the value. So, if you are focused on CPM then you need to adjust your strategies to attract more traffic which will result in a better income. The value allows you to focus on one thing at a time with which you can narrow down the approach to further elevate your income.
Negotiate Deals By Understanding The Pricing Benchmark
You can use CPM as a benchmark for setting prices when selling ad space. Advertisers often have specific CPM targets in mind, so you can align their pricing strategy with these expectations.
Revenue Estimation
CPM will give you a clear understanding of how much you can earn per 1,000 ad impressions. This provides a straightforward way to estimate your potential revenue based on their current traffic.
Compare Advertisers And Geographies
With the help of CPM, you can compare the advertisers and see which one is going to spend the most on your inventory. You can quickly funnel down your options and contact the ones directly that will help you earn better revenue.
Similarly, you can compare the geographies and see which ones are giving you the best rates. You can use the information to select the regions where you are getting better rates and adjust the content to grow your revenue further.
Reduces Click Fraud Concerns
CPM is less susceptible to click fraud compared to CPC (Cost Per Click) advertising. This will protect your total earnings. Since you will be paid based on impressions, fraudulent clicks have a less direct impact on your earnings.
The Bottom Line
Till now you will be able to understand both the terms and calculate the values using the above-mentioned formula. Don’t forget to go through the difference table to understand the key differences between both parameters quickly. You can focus on both parameters to adjust your strategies to generate better revenue by picking the best ad campaigns.