CPM vs eCPM vs RPM: what’s the difference?

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If there’s one thing online marketing has, it’s a lot of acronyms!

Three, in particular, are widely used in the purchase of advertising space:

In self-service paid media platforms like Google Ads or Facebook Ads, most brands and advertisers think of things in terms of PPC or pay-per-click: when a user clicks, the advertiser pays.

It doesn’t rely on the CPM model at the fore, so terms like CPM or RPM can be confusing at first for advertisers who have only done PPC.

These metrics are most commonly used in buying programmatic ads, but they can also help you “match” costs to understand what one channel costs over another.

To demystify acronyms and their place in the paid media ecosystem, let’s take a look at each type and a few examples.

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One thing to keep in mind with media money is that there are two parties involved:

  • The advertiser who purchases media.
  • Publishers, which are the websites that actually serve the ads.

The acronyms that are circulating apply to these two specific parties.

What is CPM?

CPM stands for “cost per thousand impressions”.

This is the amount an advertiser pays to run their ad 1,000 times.

Note that this is a advertiser metric, not that of an editor.

In other words, it’s what an advertiser pays to get their ad to show.

This is do not what a website earns when it shows the ad 1,000 times. (This is RPM, which we’ll get to shortly.)

Generally, the more valuable the site traffic, the higher the CPM will be.

The calculation of CPM follows a simple formula:

This breaks down the cost of a single print, then multiplies it by 1,000 to get the CPM.

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Let’s look at an example.

Suppose you enter into a contract for a programmatic display purchase and have $ 30,000 to spend on the campaign.

You run estimates on how many impressions that will give you, and that comes down to 2,500,000 impressions.

$ 30,000 divided by 2,500,000 times 1,000

Based on the calculation, you would pay a CPM of $ 12.

CPM can also help you understand the relative value of audiences within a platform like Facebook when you view them side by side.

Here is an example of CPM at the top of the funnel (hence, broader targeting), in the middle of the funnel (hot audience targeting), and at the bottom of the funnel (potential customers / site visitors).

CPM vs eCPM vs RPM: what's the difference?

Notice how lower the CPM is for wider targeting compared to the bottom of the funnel users?

Bottom-of-the-funnel users aren’t only a smaller group that a brand is trying to reach, but they’re also likely to buy – and all other advertisers are probably trying to target those same people.

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The supply is low and the demand is high, and you see the prices go up as a result.

What is eCPM?

You might be wondering now: what if I make a large ad space purchase that uses a bunch of different auction models?

How would I understand CPM in relation to my overall goals?

This is where eCPM comes in.

Suppose you have CPM purchases, but you also have a portion of your media purchase devoted to costs based on CPA or CPC.

Since the optimizations are different for each type, it might seem like there isn’t a common thread to understand your total cost.

But there is!

The eCPM or “effective CPM” achieves this goal.

It converts non-CPM purchases into a CPM calculation so you can figure out what you are “actually” paying (see?) In CPM.

The calculation is the same, but the reference “e” indicates that this is not necessarily a fixed price model as a direct CPM purchase through a publisher would be.

So let’s say you had 85,000 impressions in a Google Ads PPC campaign and paid $ 20,000. Using the same calculation as above, you would get a CPM of $ 23.53.

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The eCPM will often be higher than the fixed CPM in more direct response channels like CPC or CPA campaigns because it is a higher value action that you are looking for from users.

What is RPM?

RPM stands for “revenue per thousand impressions”.

Unlike CPM, RPM is a editor side metric.

It’s a measure of a publisher’s (or website’s) income per 1,000 times they run an ad.

Basically, this is the rate at which they make money – so this is a very important metric!

The equation will sound very familiar to you since all you do is swap the advertiser’s cost metric for the publisher’s revenue metric:

Advertising revenue divided by impressions x 1,000

If a website earns $ 500 and has 100,000 ad impressions, its RPM is $ 5.

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So every time their site shows 1,000 ad impressions, they earn $ 5.

RPM of pages

Websites and publishers can measure their RPM more specifically than overall impressions to gain deeper insight.

For example, maybe they have a very busy homepage and they want to understand the specific income for that.

They can then use the same RPM formula, but apply it to that page only calculating the revenue and impressions that come with it.

This can help publishers understand what their most valuable pages are, as well as their poorest performance that they may want to work on.

Session RPM

It’s slightly different, as the value comes down to site sessions, not necessarily overall ad impressions.

In other words, it shows the revenue per session on the website, which is more like measuring a visitor’s worth compared to loading a page and showing an ad.

In this calculation, you trade ad impressions for sessions, like this:

Advertising revenue divided by the number of sessions multiplied by 1,000

So, if a site earns $ 500 and has 60,000 sessions, its session RPM is $ 8.33.

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What is RPM on YouTube?

There is always an exception, isn’t there?

There is a different RPM metric on YouTube.

But that means something a little different.

On YouTube, RPM stands for “revenue per thousand” – or how much a creator earned per thousand views.

Here is how it is calculated:

All revenue reported in YouTube Analytics x 1,000 /
Total number of views during the same period

Why is it important to know these abbreviations

If you only work in PPC, you might be wondering if you need to know these abbreviations when you are already analyzing so much data.

Let’s put it this way: It can’t hurt to understand this ecosystem.

If you’re aiming for a high CPC with a long buying cycle, understanding the cost versus what you get is part of a strong media manager.

In long sales cycles, the upper and middle phase of the funnel can take a very long time, and you have to weigh the cost of a high value direct response environment versus a larger scale, cheaper option. .

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Can you afford to pay $ 100 in CPC when you might be better off running a low CPM campaign to build awareness of your brand first?

If you’re paying for that $ 100 click, do you understand your cheapest options for a consistent brand presence on display or on something like Facebook?

Understanding CPM in relation to your goals and what it costs to be on different sites will make you an exceptionally agile media marketer.

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