# ECPM: Definition, Importance and How To Calculate

## Why is eCPM important?

There are many reasons eCPM is important, such as:

### 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.

## 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:

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 :

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.

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.

## 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.