What Is eCPM?
Written by publift2019
25 Jun, 2020
eCPM is a key ad performance metric used by publishers to monitor the revenue generated from the ads on their site. It’s common for publishers and to be confused by eCPM, as there’s also another metric called CPM. It’s easy to confuse the two at first, but once you finish reading this article that won’t happen again. We’ll see the difference between ecpm and CPM, how you can calculate eCPM, and what can you do to analyse and optimise this metric.
eCPM is an acronym that means effective cost per mille. This metric is the result of dividing the ad revenue per banner or campaign by the number of thousand ad impressions. Mille is the Latin word for thousand. The result is a way to measure the performance of an ad based on the revenue generated for every thousand impressions.
This metric is often used to calculate the revenue for display ads, which can be shown in a different number of platforms. The higher the eCPM, the higher the revenue the publisher is generating from their ads.
This metric is essentially the same as RPM, which stands for revenue per mille, or revenue per thousand impressions. RPM was initially used by publishers and eCPM would be used by advertisers, but publishers started using eCPM too to align themselves with the language used by their clients. Now, most of the industry uses eCPM to designate this metric.
What is the difference between CPM and eCPM?
CPM is a reach and pricing metric, used by advertisers to estimate the cost of their campaigns and the reach they will have with their budget.
For publishers, using CPM to estimate revenue can be misleading. There are a lot of exceptions which create differences between the price set by the publisher on a thousand impressions and the actual revenue generated. For example, a large advertiser may have more impressions than what they actually paid for. Other advertisers may have ended up paying more, as the number of impressions is rounded up to the next thousand.
eCPM is a publisher’s metric. It solves those issues by calculating the effective revenue for every thousand impressions. But eCPMs can be calculated not just for CPM campaigns, but for CPC and CPL too. This allows publishers to compare the effectiveness of different types of advertising and optimise to increase revenue accordingly.
The main difference between CPM and eCPM is that CPM is only used in the context of calculating cost per a thousand impressions in a CPM ad buying model, while eCPM is a revenue metric that can be applied to any pricing method.
Why is eCPM important?
This is a key metric because it helps publishers to estimate their future revenue. Using the average eCPM from your past campaigns, you can set up targets and use it as a benchmark for testing the best performing ads on your site.
Using this metric can help publishers evaluate the performance of their monetisation efforts regardless of channel, ad type and pricing model. Once converted to eCPM publishers can compare the effective revenue from different ad units even if their pricing model was different.
How do you calculate eCPM?
To calculate this metric all you need is this formula:
eCPM = (Total ad revenue / total impressions) x 1000
If you have the total revenue and the total number of impressions for an ad unit or campaign, the eCPM calculation is independent on the original pricing model of the ad unit. The only thing you need to do is to divide the total revenue by the number of impressions and multiply the result by one thousand.
Let’s see an example. If a site’s total ad earnings were 700$ in a day and they had 200.000 ad impressions, they would use the formula stated before:
(700$/200,000)*1,000= 3.5$ eCPM
So in this example, for every 1,000 impressions, this site is generating 3.5$USD in revenue.
If you don’t have the total revenue number, you can estimate that by multiplying the number of clicks, if this was a CPC campaign, or the number of conversions, if it was a CPA campaign, by the average CPC or CPA rate. Once you have that number is easy to then proceed with the same calculation to get your effective cost per thousand impressions number.
What is a good eCPM?
As always, a good eCPM will depend on a number of factors. A metric without context is just a number, and you need that context to compare and evaluate its performance. Some of those factors are:
- Ad placement: ad units placed above the fold will generate more revenue, but have a higher number of impressions too.
- Location: Publishers working in top tier markets like the UK, the US and such then to see higher eCPM rates.
- Seasonality: There are certain events which increase or decrease the number of impressions bought by advertisers. While summer may cool some advertisers’ efforts, events like Black Friday, Christmas, Valentine’s Day, Mother’s Day and other commercial-oriented holidays definitely increase the competition for space on most publisher’s sites.
- Site speed: As with other user experience factors, the site speed determines whether a user will engage with the content and whether the ads will be served in a timely fashion.
- User engagement: A site with engaged, loyal visitors which come back to the site frequently will be able to command higher prices, which will result in higher rates.
- Advertising format: Ads shown in videos will be more expensive than a regular display ad, which will result in a higher total revenue.
- Advertising channel: Native ads or sponsorships can generate higher revenue rates than display ads.
- Audience reach: Publishers with a niche audience can have higher rates than sites that target a more general audience.
By comparing different eCPM rates in your site, depending on different factors like channel, placement or format, and looking at historical data like year-on-year, month-on-month and trends over the last few months, you can accurately judge what’s a good eCPM rate.
Furthermore, this data will allow you to set realistic and objective targets for your monetisation strategy efforts.
What is the average eCPM?
eCPMs on average tend to fall between 4-10$. But the average eCPM for a publisher’s site will depend on several factors. The target audience, the advertising market, the ad location and other factors will have an impact on the average eCPMs.
Why do I have a low eCPM?
As we said before, eCPM rates depend on a lot of different factors. Not having enough competition for your ads, or not implementing the right ad formats or ad layouts on your site can impact your overall eCPMs.
What is an eCPM floor?
An eCPM floor is the minimum CPM bid an advertiser must meet to serve an ad on a publisher’s site. Usually, the winning bidder pays .01$ more than the second-highest bidder. If you set up a price floor, then the winning bidder will be .01$ more than the eCPM floor the publisher defined. It’s an effective strategy to increase advertising revenue.
But there’s a catch. The pricing floor will only go into effect if the winning bidder is above the floor. If none of the bids meets the minimum floor defined by the publisher, then an ad won’t be served, and there will be a revenue loss.
eCPM floors can be defined for geographical locations, device types, advertisers or even for individual ad units. This pricing strategy requires the ad ops team to monitor constantly its effectiveness. Not setting up the floor prices correctly can result in a revenue decrease.
How you can increase eCPM?
There are several strategies you can use to optimise your eCPM rates. But the effectiveness of each strategy will depend on the context of each publisher and their own ad monetisation strategy.
Some actions you can take to increase your eCPM:
- Join multiple ad networks. Offering your ad inventory in several ad networks is a way to generate demand and increase the value of your inventory. Increasing the competition for your ad units is a way to increase revenue and raise your eCPM. When joining an ad network look for the ones that are offering the best deals for your geographical location.
- Implement a supply-side platform. With a supply-side platform, you can easily implement several ad networks and include other revenue optimisation features such as header bidding. This way you can increase your fill rate and raise your overall revenue, raising your eCPM rates.
- Test different ad formats and sizes. Publishers have now a lot of different options for monetising their content. Besides display ads, which come in a variety of sizes and formats, publishers can implement rich media ads, video ads, native ads and more. Some of these formats will attract more premium advertisers, or they can increase the effectiveness of your ad units. Finding the right combination of ad formats and sizes will allow you to optimise your eCPM.
- Optimising ad layouts. Another testing method you can use is to try new ad layouts. Test different ad placements and the number of ads on your pages to find the right spot between monetising your content without hurting site usability and user experience. More ads don’t necessarily mean higher revenue.
- Increase your ad viewability. Your viewability rate tells the percentage of your ads that are viewed by users for a minimum amount of time, as defined by the IAB and other institutions. Increasing viewability will raise the number of impressions of your ads and increase your total revenue as well. Besides that, premium advertisers will only include you in their media buying if you reach a minimum viewability rate. By increasing the viewability rate you’re making your site more desirable for advertisers and increasing competition for the ads on your site.
- Improve your user experience. Following best usability and user experience practices and respecting the user’s privacy will increase the trust of your audience on your site. If your site overwhelms the user with ads, your bounce rate will suffer. In the long term, it’s a losing game as your organic traffic will decrease and ad networks could block your site.
- Optimise your site for SEO. Organic search users are high-quality users, as they reach your site after completing a query in a search engine with an intent to fulfil an informational need. High-quality traffic allows publishers to increase their eCPM.
- Make sure your website is optimised for mobile. According to Statista, more than half of internet traffic comes from mobile now. Prepare your site by implementing AMP, which will increase the speed of your site, and adapt your ad units for mobile screens.
Use eCPM for revenue analysis and optimisation
Publishers use eCPM as a key metric to monitor their ad effectiveness and their overall content monetisation efforts.
By using eCPM you can normalise your revenue rates and compare ad revenue generated through different pricing models across geography, ad network, device, ad unit and more.
As it’s a calculated rate, rather than a total revenue number, eCPM will allow you to spot ad units, formats, audiences or ad networks that are performing best, even if they are not among the top total revenue generators.
For example, you can have a rich media ad that generated 500 impressions and 4$ in revenue, and a display ad that had 1300 impressions and 7$ in revenue. The display ad generated more total revenue, but when looking at eCPM rates, the rich media ad had an eCPM of 8$, while the display ad had an eCPM of 5.4$. That means the revenue optimisation efforts should point in the direction of increasing impressions for the rich media ad, as it has the potential to bring in more additional revenue.
By identifying your best-performing ads across multiple variables you will be able to ground your revenue optimisation efforts in solid data and monitor the effects of your optimisation strategies over time.
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