Why is eCPM important?
There are many reasons eCPM is important, such as:
Increasing income
ECPM is crucial because it can raise your ad revenue. You can use various advertising strategies to raise your eCPM, which will also raise your income. For instance, by experimenting with ad formats and enhancing ad viewability, you could raise your eCPM. Calculating the eCPM of two or more types of ads that you currently use is another way to increase your income. You could invest in more video ads if your video ads’ eCPM is significantly higher than your ad banners’.
Measuring across formats
Ad campaign pricing models come in a variety of forms, and they are metrics that demonstrate different ways that ads generate income. Some examples include cost-per-click (CPC) or cost-per-action (CPA). eCPM can be used to calculate ad revenue and expenses no matter the ad format, purchasing strategy, or conversion metric. This is crucial if you want to compare the effectiveness of your entire ad inventory across various formats and have a diverse ad campaign. This can be done using eCPM without converting price models.
Estimating future revenue
Additionally, you can predict your ads’ potential revenue using eCPM. Calculate the average eCPM of your previous advertising campaigns to do this. This value can serve as a benchmark for setting objectives for your current advertisements. Your current ads may continue to perform well if their eCPM is higher than it was for your previous campaign. If their eCPM is lower, you can use your previous eCPM as a benchmark for improvement. This is significant because, by enabling you to project your future income, it can give you a feeling of financial security.
Testing new types of ads
If you want to test new types of ads, it’s crucial to use eCPM values. You can experiment with various ad formats thanks to eCPM, which could help you diversify your advertising campaign. For instance, the eCPM of the new ad format you are testing is $4. Your revenue with the new format might be lower if your previous campaigns’ eCPM was $5. Therefore, you might invest in a different ad format. This is a helpful method for testing new advertisements without taking a significant financial risk.
What is eCPM?
Advertising experts use the metric effective cost per mille (eCPM) to determine how well their ads are monetized. Based on how much money they make for every 1,000 (mille) ad impressions, analysts can use this metric to assess how well ads are performing. Advertisers measure ad engagements, such as views or clicks, through ad impressions. A content publisher may use eCPM to test the effectiveness of various ad displays before deciding which kind of advertisement to run on their platform.
Publishers can adjust their advertising strategies to maximize the amount of money they can make based on their calculated eCPM. A publisher typically makes more money from their ads when their eCPM is high. Publishers may test out various ad formats, such as banners or videos, to determine which has a higher eCPM. The number of engagements an advertisement receives could be increased by changing the placement of their ads, which would increase their eCPM.
Formula for eCPM
You can calculate eCPM by using this formula:
ECPM = (X ÷ Y) × 1,000
where:
X = total ad revenue
Y = total impressions
For instance, if your daily ad revenue was $600 and your impressions totaled $200,000, You divide total advertising revenue by total advertising impressions. You then multiply that figure by 1,000 to determine your eCPM. For every 1,000 impressions you receive, you make $3. Here is an example of how the formula would be used in this scenario:
ECPM = (600 ÷ 200,000) × 1,000
ECPM = 0.003 × 1,000
ECPM = $3
How to calculate eCPM
Here are four steps to calculate eCPM :
1. Determine your total ad earnings
First, you can determine your total ad earnings. To determine this, multiply the amount you make per advertisement by the total number of advertisements you sell. For instance, your total ad earnings would be $600 if you sold 100 ad units for $6 each in a single day.
2. Divide your total ad earnings by your impressions
The following step is to divide your total ad revenue by your total impressions. This step gives you the revenue per impression. In the event that you had 200,000 impressions in a single day, you would divide $600 by 200,000, which would equal 0. 003.
3. Multiply by 1,000
You can multiply your revenue per impression by 1,000 to determine the eCPM. This enables you to calculate your earnings per 1,000 views. You can multiply 0. 003 by 1,000 to get your eCPM, which is $3. You multiply your revenue per impression by 1,000 because publishers typically sell their ad units in groups of 1000.
4. Implement your findings
You can use your eCPM to evaluate the effectiveness of your advertisements now that you have it. You can compare your ads’ eCPM to assess their value because a higher eCPM indicates greater earnings. For instance, you might try to figure out why the lower-paying ad isn’t generating as much revenue if three of your ad formats have an eCPM of $6 and one has an eCPM of $2.
Differences between eCPM and CPM
Although cost per mille (CPM) and eCPM are similar calculations, they yield different results. It’s a metric that businesses use to determine how much they must spend on each 1,000 ad impressions. To solve this equation, multiply the total cost of the advertising campaign by the total number of impressions, and then divide the result by 1,000, as demonstrated by:
CPM = (X ÷ Y) × 1,000
where:
X = total cost of ad campaign
Y = total impressions
The main distinction between CPM and eCPM is who uses them and what they are used for. Publishers use eCPM while advertisers use CPM. While CPM measures how much publishers must pay for ads, ECPM measures how much money ads make. Additionally, CPM can only be used by advertisers who employ a CPM buying model. Publishers can use eCPM regardless of the type of model.
AD Tech 101：What are CPM and eCPM?
FAQ
What is the difference between a CPM and a eCPM?
The primary distinction between CPM and eCPM is that while eCPM is a revenue metric that can be used with any pricing strategy, CPM is only used in the context of calculating cost per thousand impressions in a CPM ad buying model.
What does paid eCPM mean?
Effective cost per thousand impressions, or “eCPM,” is the amount of money generated by advertising for every 1,000 ad impressions. There are two sides to eCPM: monetization and user acquisition. On the subject of monetization, eCPM is a metric used to assess an app developer’s success with ad monetization.
What is a normal eCPM?
Publishers can determine their eCPM using a straightforward formula: multiply the result by 1,000 after dividing their advertising revenue by the quantity of impressions served. This equation can calculate the eCPM of a single ad placement or the entire inventory for an app. eCPM = (ad revenue earnings / total Impressions) x 1,000.
