CPM vs eCPM
Efficiency Unveiled: CPM vs eCPM
CPM(Spend)
CPM stands for Cost Per Mille, where “mille” refers to a thousand impressions. It’s a common advertising metric used to calculate the cost of 1,000 ad impressions. The formula for CPM is:
CPM = (Cost of advertising / Number of impressions) x 1000
For example, if an advertiser spends $500 for 100,000 ad impressions, the CPM would be calculated as follows:
CPM = ($500 / 100,000) x 1000 = $5
eCPM(Earn)
eCPM stands for Effective Cost Per Mille and is used to measure the effectiveness of an advertising campaign across different channels or platforms. It calculates the estimated CPM that would be obtained if the advertising inventory were sold at CPM pricing. The formula for eCPM is:
eCPM = (Total earnings / Number of impressions) x 1000
For instance, if a website earns $800 from 200,000 ad impressions, the eCPM would be:
eCPM = ($800 / 200,000) x 1000 = $4
Fun Fact act about Ads revenue
Suppose you’re a website or app owner running ads through an ad network. The ad network has a revenue-sharing agreement where they take normally around 32% to 68% of the ad revenue, and you receive the remaining.
Let’s say:
- Total earnings from ads: $1000
- Total ad impressions: 500,000
- Your share percentage: 60%
First, calculate the revenue that you, as a website or app owner, receive after the ad network’s cut:
Your revenue = Total earnings x Your share percentage
Your revenue = $1000 x 60% = $600
Now, calculate eCPM using the revenue you received and the total number of ad impressions:
eCPM = (Your revenue / Number of impressions) x 1000 eCPM = ($600 / 500,000) x 1000 = $1.20
In this example, even though the total earnings from ads might have been $1000, after the ad network’s 40% share, your actual revenue is $600. The eCPM, calculated based on your revenue and total impressions, is $1.20 per thousand impressions for your website or app.
This demonstrates how the eCPM reflects the earnings received by the website or app owner after the ad network’s portion is deducted and measures the effective performance based on that revenue.
CPM and eCPM Trend
The main difference between CPM and eCPM is that CPM represents the cost per thousand impressions an advertiser pays, while eCPM represents the estimated CPM based on total earnings and the number of impressions from a publisher’s perspective. eCPM helps publishers compare the revenue generated from different ad networks or campaigns on a common basis (per thousand impressions), regardless of the monetization methods used (CPM, CPC, CPA, etc.).
