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You may have learned about CPM, but then you got confused when you found out about eCPM. That’s the case with a lot of publishers. eCPM or Effective CPM is another key metric used to measure the ad revenue. But before getting to it, let’s recap the basics first.
CPM or Cost Per Thousand Impressions is the amount advertisers are willing to pay for every thousand impressions they receive. It’s an advertisers’ side metric that help them decide the budget of their campaigns.
CPM is calculated using this formula:
For example, if an advertiser has a budget of $100 and wants to reach 100,000 users, then his/her CPM would be $1, i.e., ($100/100,000)*1000.
How is eCPM Different?
eCPM or effective CPM is the revenue earned by a publishers for every thousand impressions. You need to pay special attention to the term ‘effective’. Here, effective CPM means the revenue earned by the publishers, effectively.
Confused? Let’s try again. eCPM is the cumulative revenue generated by publisher per thousand impressions, some of which also get clicked, then converted into leads, and become customers for the advertisers. Hence, eCPM is not just calculated using CPM campaigns but also CPC, CPL, and other such campaigns running via publisher’s inventory.
eCPM is predicted by the ad network of the publisher using this eCPM formula:
But, it sounds a lot like RPM (revenue per thousand impressions)
Google AdSense used to predict publishers’ earnings using eCPM in their previous models. However, newer AdSense versions show RPM instead of eCPM. Meaning, eCPM and RPM refer to the same thing, according to AdSense. However, if you are partnered with different ad networks, it’s better to clarify with them the metrics they use to predict your earnings.
Simply put, CPM is the money advertisers spend on a campaign. And eCPM is the amount earned by the publisher.
Why eCPM is Important
eCPM helps predict the earnings of the publishers. A target earning number can work as a motivation for publishers to work accordingly. If you are performing ad testing to find the best performing ads for your website, then eCPM achieved for different ad tests can help you choose the winner ad.