By Roman Vrublivskyi
The effectiveness of digital advertising heavily relies on continuous analysis, and eCPM and CPM are among the most common metrics tracked by publishers and advertisers to understand the performance of their campaigns. They are often confused with one another, so our guide is here to clarify the difference and explain how exactly these metrics can be used by marketers and publishers.
What is CPM?
Standing for “cost per mille”, CPM represents the cost per thousand impressions. For advertisers, that is a fixed price that they bid or pay for each thousand ad impressions. In turn, for publishers, CPM is the revenue they generate from every thousand impressions.
To calculate CPM, you need to divide the total cost of an ad campaign by the number of generated impressions and then multiply this figure by 1000. For instance, the campaign costs $400, and the number of impressions is 100,000. If we divide 400 by 100,000, we get 0.004. By multiplying this result by 1000, we get a CPM of $4.
Advertisers can also calculate CPM by dividing the total campaign budget by the expected number of impressions. The result should also be multiplied by 1000. If we use the example provided above one more time, this means that every publisher who sells their inventory for $4 or less will be able to display this marketer’s advertisement.
What is eCPM?
As for eCPM, it stands for “effective cost per mille” or effective cost per thousand impressions. It illustrates the revenue a publisher earns for every thousand impressions. The key difference is that eCPM is the average of multiple CPMs. While CPM can be used to calculate the income from every specific advertiser, eCPM allows publishers to understand the combined average of all bids. Basically, eCPM is the metric focusing exactly on publishers, while CPM is more related to advertisers.
The formula for eCPM is as follows: the total ad revenue is divided by the total number of ad impressions and then multiplied by 1000. For example, the website served 300,000 impressions in one day, and the publisher earned $1,500 in total. In this case, eCPM would be $5. Advertisers can use the total ad spend instead of revenue.
Note that while CPM can be applied only to the CPM buying model, eCPM can be used in any context.
Contextual Applications of CPM and eCPM
Now that the difference between effective cost per mille and cost per mille is clarified, let’s explore how these metrics can be used by advertisers and publishers.
As for CPM, publishers use it to track and optimize their ad revenue. By calculating CPM, they can identify high-value marketers willing to pay premium prices for the inventory, find out what formats are the most effective, and make data-driven decisions regarding their strategies. As a result, tracking CPM is a way to maximize revenue.
In turn, advertisers can use CPM to compare the cost-effectiveness of different campaigns or placements to understand which drives the most impressions for the lowest price. Besides, the metric allows marketers to identify the cost of reaching their audience, which is essential for budget planning. Tracking CPM is also a way to find out how effectively an advertiser builds brand awareness.
Now, let’s switch to eCPM. Apart from evaluating the overall profitability of the website, publishers can use this metric to forecast future income, compare the performance of different pages or websites (when applicable), and set floor prices in a more effective way. Additionally, if a publisher uses several ad platforms, tracking eCPM allows them to identify the most efficient solution.
Even though eCPM is mainly publishers’ metric, advertisers can also use it to measure the overall effectiveness of their campaigns.
Real-World Scenarios of Using eCPM and CPM
Now, let’s take a look at a couple of real-world cases to provide you with a better understanding of how these metrics can be applied.
For example, an advertiser is going to launch a large-scale brand awareness campaign. They know the campaign budget and the estimated audience size. After calculating CPM, they get the result of $5. Therefore, considering this, they can set up a bid price that is convenient for them and applicable to their budget. Without knowing potential CPM, an advertiser risks overpaying and going beyond budget limits or losing an opportunity to access premium inventory. Then, by continuously analyzing the real CPM after launching the campaign, an advertiser can make sure that everything goes as planned or timely react to any issues.
Now, let’s review a case for a publisher who wants to identify the most profitable advertisers and build stronger connections with them. This can be done by calculating CPM. Then, after the high-value marketers are detected, a publisher may want to contact them and offer guaranteed or direct deals.
And here comes a scenario for eCPM. For example, a publisher is going to review their monetization strategy and find optimization opportunities. After checking eCPM rates for different months, they discover that there is a higher demand for ad inventory during Christmas and Black Friday periods, and marketers tend to increase ad spending. With this knowledge in mind, a publisher can adjust floor prices during the mentioned time frames and, as a result, effectively monetize remnant inventory and drive income.
Marketers willing to optimize their strategies and maximize the performance of their ad campaigns can also use eCPM as one of the metrics when looking for opportunities. However, for them, CPM is still more important to track.
Boost Your eCPM and CPM with Programmatic Advertising
Programmatic technology revolutionized the digital advertising landscape, allowing both publishers and advertisers to automate the process of buying and selling ad inventory. When everything is set up correctly, advertisers can reach exactly those users who are most likely to get interested in their products or services. In turn, publishers can monetize their inventory effectively. Auctions happen automatically, and the whole process takes just a couple of seconds. Therefore, switching to the programmatic approach is a way to optimize cost per mille and effective cost per mille rates.
However, publishers and marketers are not the only ones who can benefit from this technology. Using Attekmi solutions, you can enter the programmatic environment quickly and start earning on media trading by connecting demand and supply partners. Multiple ad formats and traffic types, a variety of filters and settings, and numerous additional features — offer a reliable ad exchange to your partners and maximize your revenue with Attekmi.
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FAQ
What is eCPM vs CPM?
It is effective cost per mille vs cost per mille. Being the average of multiple CPMs, the first metric illustrates revenue received for a thousand impressions, and the second one — cost per thousand impressions. CPM is typically tracked by advertisers, while eCPM is tracked by publishers. Additionally, eCPM applies to any buying model, while CPM applies only to CPM.
CPM vs eCPM: which metric to prefer?
CPM is considered an advertiser-focused metric, while eCPM is typically used by publishers. Keeping your goals in mind is a way to make a choice. However, to get a better understanding of the website or campaign performance, publishers and marketers can track both metrics instead of choosing between cost per mille vs effective cost per mille.
Is tracking only CPM and eCPM enough for effective optimization?
Monitoring eCPM and CPM is essential, but there are many other metrics to consider for making effective data-driven decisions. For instance, advertisers should also keep an eye on clicks, cost per click, conversions, etc. In turn, publishers need to monitor ad fill rates, analyze the performance of their websites to keep them efficient, and so on.