What is rCPM and Why Publishers Should Take Notice
Ben Morrisroe, Marketing Coordinator
The digital advertising space is filled with jargon and long acronyms designed to add a little confusion to your day. CPM, eCPM, rCPM and RPM. What does it all mean? Is there a difference? And which one should I be focusing on as a publisher?
At the end of the day, we are trying to evaluate the money we are able to generate from our websites and each of these metrics gives us a different perspective and insight into where our money is generated, and from where.
I am going to break each of these metrics down and explain how they are calculated, what they are used for and which you should be using to evaluate your site.
CPM, as you smart people know, is an acronym for cost per mille, meaning cost per 1000 impressions. The total price paid in a CPM deal is calculated by multiplying the CPM rate by the number of impressions. For example, one million impressions at $10 CPM equals $10,000 in gross revenue.
In the past, before header bidding, this was often the metric publishers would use to evaluate which demand partners would get priority in the waterfall system. Partners offering a high CPM for impressions in the previous week would be evaluated as the best people to offer impressions to first in order to maximise revenue.
What is Page RPM?
Page RPM, or revenue per 1000 page impressions, is Google AdSense’s default reporting metric. It is calculated by dividing your estimated earnings by the number of page views you received, then multiplying by 1000. Page RPM shows you the revenue by page of your website, while CPM is a metric per ad unit. As a rough rule, RPM will always be higher than CPM because its an aggregate of all ad units on a page.
eCPM, or effective cost per mille, takes into account how many impressions were actually paid for. eCPM will be specific to each of your ad sources and is used to show what the value of your ad inventory is, based on the number of impressions your ad partners purchased.
eCPM is calculated by dividing the total earnings by the total number of impressions in thousands. It is a great performance measure for each of your ad units, allowing you to compare results. The formula is revenue/(paid impressions/1000).
If a publisher is using an ad network to fill their inventory and they send 1000 impressions and are compensated $6, then the publisher has an eCPM of $6. It is important as a publisher to understand exactly how much you are earning from a revenue source and what eCPM they are providing.
There are many situations, however, where partners will not fill impressions due to discrepancies, not valuing the impression or users navigating away from a page before the ad can be shown. In the waterfall system, many impressions are also lost as the impression is passed down the chain as much of the cookie data is lost leaving the impression far less valuable. These lost impressions should also be accounted for when evaluating revenue.
Let's take a look at an example.
You are a publisher and you agree on a CPM of $5 - sounds pretty good to me. If your site gets 100,000 impressions a day and your ad partner fills 80% of the total impressions available, giving you a total of 80,000 paid impressions, then you collect $400 in gross revenue a day. Your ad partner has left you with 20% of your inventory unfilled and so left unmonetised. When we use rCPM we look at the total impressions that you made available to your ad partner, not just the ones they decided to fill.
Real or True CPM
rCPM, or true CPM as we like to call it, is extremely useful for publishers as it helps you calculate the true value you are getting from an ad partner based on the number of impressions your ad unit is getting, not just the ones your ad partner is agreeing to pay for. Agreed upon CPMs can often hide this kind of information. This is particularly important when using the waterfall system of ad serving where decisions on the top partner are often made based on the CPM a partner is willing to offer.
The formula for rCPM = revenue/(total impressions/1000)
If your site gets 100,000 impressions a day, this gives your ad partner with the highest priority in your waterfall system 100,000 opportunities to purchase your inventory. If they fail to fill those impressions, that is revenue you are losing out on and should be factored into your decision on what demand partners to prioritise within the waterfall.
So let’s look at a calculation of the revenue received from our ad partner.
$400/(100,000/1000) = $4
So we are in fact not getting the agreed upon $5 CPM from this partner. We only monetized 80% of our available inventory so we only really received $4 for all available impressions. By calculating the rCPM we can better evaluate our ad partners and see where we may be losing out on possible revenue. Certain partners may not be the best way to maximise revenue despite appearing to have higher CPMs.
This information can then be used to put frequency caps on certain ad partners until their fill rate increases and to use the rCPM as the floor price for a network in order to have more impressions filled and increase revenue.
Is rCPM Relevant with Header Bidding?
Even with header bidding, true CPM can be a useful metric for measuring and evaluating different partners. Despite the fact that demand partners all now bid on an impression simultaneously, impressions can go unfilled by partners that win the auction. Ad partners may win the auction but users may navigate away from the page before the ad has time to load, leaving the impression unfilled. This kind of discrepancy can only be accounted for when using the rCPM and will give you a lower level of revenue generated from that partner than the traditional CPM which can hide this discrepancy.
What We Use at Publift
In our Publift dashboard, we use true CPM to provide publishers with as much transparency as possible as to where their revenue is coming from in order to help further maximise gains from every last impression your website gets.