Entering the world of digital advertising comes with a myriad of metrics you need to learn, like CPC, CPI, CPM, and eCPM. Our focus of the day is eCPM, also known as effective cost per mille.
Due to the naming similarities, people often confuse it with CPM, cost per mille. But what is eCPM, and why is it so important? We’re here to help you understand the definition and take a step toward becoming an advertising expert.
- eCPM can be used by publishers to estimate future revenue, decide on pricing models, evaluate monetization strategies, and set ad tests to find the best-performing ads.
- Advertisers use eCPM to determine the effectiveness of their campaigns and whether their ads are generating impressions.
- Factors that affect eCPM include website speed, ad location and time, holiday targeting, and chosen ad placement.
- Increasing your eCPM can be done by experimenting with different types of ad formats.
What Does eCPM Mean?
eCPM is the ad revenue the publisher generates per thousand ad impressions. The word “effective” indicates that the metric helps measure the effectiveness of an ad.
To fully grasp the meaning of eCPM, you need to know how it relates to two terms: monetization and user acquisition.
Calculating eCPM is critical for app developers who want to publish in-app ads because it measures ad monetization performance.
If it’s high, the ads are gaining more conversions, which means customers will compete on the ad inventory. In turn, this means more income for the publisher or app developer.
Regarding user acquisition, the eCPM or ad revenue generated by a specific campaign shows how successful it is and how many more people it can reach. The more the campaign reaches people, the more users your website will acquire.
In other words, eCPM shows a campaign’s buying power.
Why Is eCPM Important?
Calculating eCPM is crucial for publishers and advertisers. For starters, it helps publishers estimate future revenue, decide on pricing models, evaluate monetization strategies, and set ad tests to find the best-performing ads.
But most importantly, it helps them compare the effective revenue from distinctive ad units, even if their pricing models differ.
As for advertisers, calculating eCPM helps them determine the effectiveness of their campaigns and whether their ads are generating impressions.
What Is the Difference Between eCPM, CPM, CPC, CPL, and CPI?
Now that you have a better understanding of eCPM, it’s time to learn how to differentiate between it and other metrics.
- eCPM: Used by publishers to estimate the revenue they’ll receive for every thousand ad impressions.
- CPM: A metric used by advertisers to calculate the cost per thousand impressions, which helps them determine how much they’ll pay for the entire campaign.
- CPC (cost per click): Indicates the cost advertisers pay every time a visitor clicks on their ad. It’s different from CPM in that it depends on visitors taking action and clicking on the ad. CPM depends on visitors viewing the ad without necessarily clicking on it.
- CPL (cost per lead): Indicates the cost the advertiser has to pay for each lead the ad generates.
- CPI (cost per install): CPI is famous among app developers because it indicates the amount of money paid each time a user installs an app on their phone.
How to Calculate eCPM
To calculate the effective cost per thousand impressions correctly, here’s the formula you should use:
eCPM = (ad revenues/impressions) x 1000
Divide your earnings from the campaign by the total number of impressions generated by the ad unit, then multiply by 1,000.
Suppose your site has total ad earnings of $700 and 200,000 ad impressions per day. To calculate eCPM, divide 700 by 200,000, then multiply by 1,000. The eCPM will equal $3.5 million.
If you don’t want to calculate eCPM manually, especially if you have multiple ad platforms, you can find online ad platforms that do it automatically.
Factors That Affect eCPM
Whether your eCPM is high or low depends on many factors. For instance, it can change according to your website’s speed. If the speed is high, your ads will take less time to reach people and generate user engagement.
Also, the ad location and time will make a difference. Some countries have higher eCPM than others. For example, if you publish your ads with an ad network in the United States, your eCPM will be higher than if you publish it in India.
And during popular holidays, like Christmas, the chance of ad viewability increases because people have more time to spend on social media channels. So to generate higher revenue rates, many publishers target these days.
Finally, the ad placement you choose can affect your eCPM significantly. For example, imagine you published an ad on the first page of a newspaper and an ad on an interior page. The former will attract more attention. The same goes for digital ads on an advertising channel.
How to Increase eCPM
Increasing your eCPM is critical for your business if you’re an ad publisher, but how can you do so? Here’s a step-by-step guide to help put you on the right track.
1. Experiment With Ad Formats
The ad format you choose can significantly affect the impressions you get. For instance, if you use video ads on an audience that prefers reading banner ads or skimming native ads, you’ll have low eCPM.
Also, creativity is the real deal in the field of mobile ads, so if you don’t keep up with changing trends, new ad features, and technology advancements, you’ll be less likely to gain new customers.
Experiment with multiple ad formats and layouts and see which works better for your target audience. But remember to set realistic and objective targets for the ads served on your website to make the most ad revenue.
2. Work on User Experience
Giving your website users a smooth experience and guaranteeing them privacy can make or break your ads’ performance.
Placing multiple ads on your web pages is tempting, but it can annoy users and deter them from using your site. In turn, this can make you lose traffic. Prioritize users’ comfort over the number of ads.
3. Use Multiple Ad Networks
Having ad units on multiple ad networks increases value and helps you get more potential customers. In addition, when customers compete on your different ad units, your revenue is more likely to increase, followed by your eCPM.
4. Learn SEO and Apply It on Your Site
Learning SEO is crucial for the survival of your website. When your site ranks on search engines, it gets more visitors; therefore, more people will see your ads. In turn, this will increase eCPM.
Frequently Asked Questions
Why Is Your eCPM Low?
If your eCPM is low, you might be experiencing one of the following issues (or all of them):
– Choosing unsuitable ad layouts or formats
– Not having enough site traffic
– Having a bad user experience on your website
Are Video Ads or Banner Ads Better?
On most platforms, video ads generate more traffic than any other type of ads because they stand out and catch people’s attention. Meanwhile, banner ads have low click-through rates and can negatively affect a user’s website experience.
How Do You Choose an Ad Network to Join?
Conduct thorough research on multiple ad networks to evaluate the quality of their ads, the requirements of their ad formats and layouts, and the overall network’s size in the market.
Evaluate and Improve Your Ads
eCPM is a key metric among publishers and advertisers because it indicates the effectiveness of a campaign, and gives you the opportunity to learn from what worked (and what didn’t).
Now that you know what eCPM is, you can either calculate it manually using this formula (ad revenues/impressions) x 1,000, or automatically using an online calculator.