What is eCPM?
Effective Cost Per Mille, or eCPM, is a key metric that is widely used in modern digital advertising. It is used by publishers to gain insight into the performance of the ad space on their platforms and identify where their monetization approach can be optimized to improve return on investment.
What is the difference between CPM and eCPM?
Cost Per Mille (CPM) and effective Cost Per Mille (eCPM) are similar in that both are important metrics used to analyse and evaluate ad campaigns. However, they differ in terms of what they measure and how they are utilized.
CPM denotes the average cost per 1,000 impressions generated. It also functions as a pricing model in digital advertising and is often used by advertisers for budgetary planning and strategy. eCPM, on the other hand, indicates how much actual revenue is generated per 1,000 impressions. As such, it is more commonly of concern to publishers, who use the metric to gauge the profitability of their ad inventory and determine how they can monetize it effectively. In this way, we can think of CPM and eCPM as two sides of the same coin.
Why is eCPM important and how is it calculated?
eCPM is important because it provides a universal means of assessing ad revenue performance, regardless of the pricing model used to sell ad inventory. By using the metric, publishers can effectively evaluate different campaign types and ad placements based on what they bring in and make better decisions about how to adjust their ad strategies and increase profitability.
The method for calculating eCPM is fairly simple. First, take the total number of ad revenue and divide it by the number of ad impressions. Then, multiply that number by 1,000 to arrive at the final figure.
To illustrate with an example, let’s say a publisher has earned $1,000 from 200,000 impressions. Divide 1,000 by 200,000 and we get 0.005. Multiply 0.005 by 1,000 and we get an eCPM of 5, meaning that publisher earns $5 of revenue per 1,000 impressions.
What are some practices for increasing eCPM?
Publishers employ a variety of tactics to increase their eCPM. Common approaches include the following:
Header bidding: Publishers often use header bidding to boost eCPM. This is a programmatic advertising method which enables them to accept bids for ad inventory via multiple ad networks and ad exchanges so as to drive competition and higher prices.
Strategic ad placement & selection: Publishers place ads in strategic positions, such as above the fold, on their platforms in order to increase visibility and boost engagement for high eCPM. Additionally, publishers may prioritize specific types of high-impact advertisements, such as interstitial ads and native advertising, to help drive eCPM.
Technical optimization: Publishers may work to improve the technical aspects of their platforms, such as page loading times, to enhance the viewability of ads, improve UX, and boost eCPM.