OKO Deep Dives: What is eCPM?

In this deep dive, we’ll be taking a closer look at eCPM, or effective cost per mille, and help publishers understand its value, how to calculate it, how it differs from other metrics and how to optimize. Our series of OKO Deep Dives analyse key performance metrics and aim to strengthen publishers understanding which will enable them to optimize their monetization strategy.

What is eCPM & why is it useful?

eCPM is the publisher’s measure of what they are getting paid for the impressions that they serve. It stands for ‘effective cost per mille’ and represents the average revenue generated for every 1,000 impressions served. eCPM is used to measure the performance of inventory and of campaigns.

eCPM Formula

To calculate eCPM, you need to know total ad revenue earnings and total impressions for a given piece of inventory or trafficking. eCPM is calculated by dividing the total ad revenue by the total number of ad impressions and then multiplying the answer by 1000:
eCPM = (Total Ad Revenue / Total Impressions) x 1000

Example:
A publisher has two ad units on a page, with one receiving a CPM of £2 and the other £0.50p. If 2000 ad impressions were sold for each ad unit, the publisher would earn £5 in total, bringing the effective CPM of the impressions on that page to £1.25.
eCPM = (£5 / 4000) x 1000 = £1.25

Although none of the advertisers actually paid £1.25 per 1000 impressions, eCPM illustrates to the publisher the average value of 4000 impressions. Let’s look at a different scenario:

A publisher has 10,000 impressions to sell. Eight thousand impressions are sold at £0.50p CPM which earns £4 ad revenue (8000/1000 = 8 x £0.50p = £4). One thousand are sold for £2 CPM which equates to £2 ad revenue (1000/1000 = 1 x £2 = £2). The final one thousand impressions are not sold.

In total, the publisher earned £6 for 9,000 ad impressions. This equates to an eCPM and an average CPM of £0.67p per 1000 ad impressions
eCPM = (£6 / 9000) x 1000 = £0.67p

As we can see, selling more impressions for a lower CPM has generated more revenue overall than the £2 CPM for which only 1000 impressions were sold.

Comparison to other Per Mille metrics

eCPM vs CPM

It’s not unusual to see publishers using CPM where it would be more accurate to use eCPM. However, CPM is more accurately used to describe the cost to advertisers, which is usually not what the publisher receives.

Example: An advertiser buys 1,000,000 impressions through an agency at a cost of $8,000. The CPM is $8. That agency offers a publisher $5,600 to service those impressions (retaining 30% revenue share). The eCPM to the publisher is $5.60

eCPM vs Ad Request eCPM

Ad Request eCPM refers to the amount of revenue generated for each request made for a creative. Unlike eCPM, Ad Request eCPM takes into account the fill rate. Hence, ad networks with high CPMs but low fill rates are often disadvantaged. Ad Request eCPM can be calculated by dividing the total revenue by ad requests and multiplying the answer by 1000.

eCPM vs Matched eCPM

Matched eCPM ignores the fill rate and calculates the revenue per one thousand matched requests. It can be calculated by dividing the total revenue by the number of matched requests and multiplying that figure by 1000. When the impact of fill rate is removed, the network CPM may be higher but the fill rate lower which can result in lower overall revenue.

eCPM vs Ad eCPM

Ad eCPM calculates the total ad revenue per thousand ad impression by dividing the total ad revenue by the number of ad impressions and multiplying the answer by 1000. Ad eCPM ignores the impact of the number of ads that are served without generating impressions and revenue.

eCPM vs Impression RPM

Impression RPM is simply an alternative name to eCPM. Some platforms (including OKO and Google AdSense) lean towards using RPM (Revenue Per Mille) for metrics reporting on earnings, and CPM (Cost Per Mille) for those on costs in order to aid clarity.

Impression RPM is calculated by dividing revenue by impressions and multiplying the answer by 1000.

eCPM vs Page RPM or Session RPM

Page RPM looks at the total revenue generated per page viewed on site whilst Session RPM calculates the amount of revenue earned per thousand visits to a website. Whilst Page RPM is dependent on eCPM, Session RPM focuses on earnings per visit.

Where to find eCPM in AdSense

AdSense refers to eCPM as ‘Impression RPM’ and this can be found under performance reports.

Where to find eCPM in Google Ad Manager

Google Ad Manager (GAM) offers publishers a number of eCPM metrics, including two that use the eCPM formula of Revenue/Impressions*1000, depending on exactly which impressions you want to report on. These are:

• Ad eCPM : eCPM of Ad Exchange impressions (Ad Exchange Historical report)
• Ad server average eCPM : eCPM of all ads served via GAM (Historical report)

The other related eCPM metrics are:

• Ad Exchange average eCPM : eCPM of Ad Exchange impressions only, as reporting in a GAM historical report
• AdSense average eCPM : eCPM of AdSense impressions only, as reporting in a GAM historical report
• Ad Request eCPM : See “eCPM vs Ad Request CPM” above
• Matched eCPM : eCPM of Ad Exchange Matched impressions (i.e. those that returned ads)

How to increase eCPM

A higher eCPM will lead to higher earnings, as long as it doesn’t come at the expense of lost impressions. Here are some of our suggestions to increase eCPM:

• Implement Header Bidding, Open Bidding or both to increase overall fill rate
• Test and optimize different ad formats and sizes to see which performs best
• Increase Ad Viewability
• Improve the user experience
• Optimize your site for mobile

What are the limitations of eCPM?

eCPM is useful when trying to determine how much revenue is generated per 1000 impressions. However, eCPM does not represent overall site performance. For example:
A publisher has an above-the-fold ad on each page and decides to add an additional ad unit at the end of the content. The new ad unit will be in a less valuable location on page so the average eCPM will decrease. However, revenue per page will actually increase as there will be more impressions, which increases overall revenue.