Introduction
Monetization metrics are important when it comes to the digital advertising sphere. They help analyze the performance of ads on any mobile application which in turn helps with its optimization.
CPM and eCPM are the two key metrics when it comes to mobile app monetization.
- CPM: Cost Per Mille
- eCPM: Effective Cost Per Mille
They are often mentioned together and they can be confusing in certain circumstances. Although these abbreviations sound similar, their meaning, formula, and function vary for publishers and advertisers.
Let’s dive into the article to find out the differences between CPM and eCPM.
What is CPM?
CPM stands for Cost Per Millie and represents the cost per 1000 ad impressions served.
For advertisers, CPM is a fixed price they are willing to pay or bid for every 1000 impressions on the ad space.
For publishers, CPM represents the revenue generated from these 1000 ad impressions on their ad space.
CPM Formula
To calculate CPM, basic data on an app’s ad impressions – such as the total cost of the campaign, as well as the number of impressions is required.
The formula for calculating CPM is given below:
CPM = (Total cost of campaign/ Number of Ad Impressions) * 1000
The ratio of the total cost of the campaign and the number of impressions gives the CPM figure. The result is then multiplied by 1000 which gives the CPM rate.
What is eCPM?
eCPM stands for effective cost per Millie and represents the ad revenue generated from every 1000 ad impressions. Both eCPM and CPM signify the ad revenue generated by the publisher from serving 1000 ad impressions in their inventory.
The main difference is that eCPM is the average of multiple CPMs, CPCs, and other bid campaigns running across a publisher’s inventory. As the price and the bids by the advertisers are both dynamic, eCPM gives us the average value of the publisher’s inventory to draw the conclusion from.
eCPM is mainly used while monetization an app or website, eCPM is a metric used to measure a publisher’s ad monetization performance.
Higher the eCPM, the higher the value of their ad inventory or their ad earnings.
eCPM Formula
eCPM = (total earnings/total impressions) x 1,000
The ratio of total advertising earnings by the total number of impressions the app served gives an eCPM figure. The result is multiplied by 1,000. The final figure is your eCPM, or the amount of money the app earns per 1,000 ad impressions.
Also Read: A Detailed Guide on eCPM for App Publishers
What is the Difference Between CPM and eCPM?
The main difference between eCPM and CPM is the average of multiple CPMs.
eCPM gives you the combined average of all advertiser bids for your ad impressions. Since multiple advertisers are bidding on each ad impression with different CPMs, the price isn’t fixed.
CPM is useful for advertisers while eCPM is useful for publishers, comparatively.
CPM shows how much the advertiser pays for 1000 ad impressions while eCPM shows how much the publisher earns on average from 1000 ad impressions.
CPM is preceded first in a marketing campaign. eCPM succeeds CPM and it is always calculated at the end of the campaign.
Let us better understand these metrics with examples.
Example of eCPM and CPM
Every app has an ad inventory (ad spaces) where the advertisers can display their ads after buying the ad spaces from the publishers. The buying and selling of ad inventory are facilitated by the bidding system.
Say, an app has 10 ad spaces and each ad space represents 1M ad impressions. In total, this gives 10M ad impressions. Imagine 5 of these ad spaces are sold to advertisers for the CPM price of 1$ each. Hence the total revenue will be:
CPM = ( 5M/1000 x 1$ ) = 5000$
4 more ad spaces are sold for CPM of 0.02$ and the total revenue will be:
CPM = ( 4M/1000 x 0.02$) = 800$
1 ad space is left unsold. In total 9 ad spaces are sold for a total of 5800$
eCPM for the above case would be total ad revenue (5800$) divided by the total number of ad impressions sold (9M), giving you an eCPM of:
eCPM = (5800$ / 9M x 1000 = 0.64$)
Here the eCPM doesn’t represent the 10M ad impressions but only the 9M that was sold. This means that the earnings on average were 0.64$ for every 1000 ad impressions that were sold.
Conclusion
Both CPM and eCPM are essential in understanding the app’s ad revenue. They explain why and how advertisers pay for the ad inventory.
It is important that publishers and advertisers know the difference so that they can accurately measure the revenue performance and the campaign costs for better forecasting.
Are you ready to maximize your ad revenue? Get in touch with AppBroda experts today!
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