Digital Advertising

What Is eCPM and How Do You Calculate It?

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By Pep Canals, on 27 October 2021

There are a number of metrics that can be used to measure the value of your advertising inventory. One of the most effective KPIs is eCPM, a commonly used measurement that allows you to calculate the effective cost of an ad for every thousand impressions.

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What Is eCPM and How Do You Calculate It

What Is eCMP?

eCPM is a marketing metric used for measuring an ad’s monetization performance based on the revenue earned per 1000 ad impressions. It can be used to measure the success of display ads published through a variety of platforms, including desktop, mobile, in-app, and video. The higher the eCPM, the more money you are earning from your ads.

Other, more commonly known advertising campaigning models include:

  • Cost Per Click (CPC): where the publisher earns money each time a user clicks on an advertisement. CPC = Cost to Advertiser divided by Total Clicks
  • Cost Per Action (CPA): where the publisher earns money when a user completes an action, such as making a purchase or sharing personal details. CPA = Cost to Advertiser divided by Total Actions.

However, these metrics are more focused on the user, and they do not take into account the full cost of placing an ad. They also do not take into account that some ad networks do not pay publishers by impression but rather use more in-depth performance metrics. With eCPM, the focus is on the effectiveness of ad inventory, regardless of format. eCPM can therefore be used to optimize ad placements, monitor monetization campaigns, and measure overall ad revenue for every 1,000 impressions.

eCPM Calculation

eCPM is calculated by dividing the ad revenue by the number of ad impressions and then multiplying the result by 1000. This can help you determine the eCPM of specific ad placements or all inventory related to an app.

The formula is:

eCPM = (Total Ad Earnings / Impressions) x 1000

Here’s an example to illustrate how this formula works:

Your budget for a campaign is $100, and the ad receives 2000 impressions.

Using the above formula, your eCPM for this ad is as follows:

eCPM = ($100/2000) x 1000 = $50

In other words, you are spending $50 for every one thousand impressions. You can then use this figure to determine if your ad is cost-effective.

Why Is eCPM Important?

There are a number of reasons why eCPM can be a valuable metric for your business.

Let’s take a look at some of the biggest benefits.

  • It can help you track ad inventory effectiveness across any format or conversion metric.
  • You can use results to enhance the performance of your monetization strategies by optimizing placements.
  • eCPM can be a reliable metric for calculating the value of future impressions.
  • eCPM can be used to measure user acquisition campaigns as it signifies the effective value of an impression.
  • It can help you determine and compare what your traffic is worth as different variables change (website traffic, ad networks, page design, traffic sources, etc.).
  • If you have purchased traffic using other cost models, the eCPM shows you the estimated average price for one thousand impressions.

How to Increase eCPM

Ultimately, to increase your eCPM you need to optimize your ad monetization strategy. There is no one-size-fits-all solution to this, but there are a number of strategies and techniques you can use to drive growth.

Experiment With Ad Formats

When it comes to eCPM, not all ad formats are equal. It’s a well-known fact in advertising circles that videos tend to generate a much higher eCPM than ads that rely on more static formats like images or banners. However, that’s not to say you should ditch all other formats and focus exclusively on video. What works best for you will depend on your industry, the design of your website or app, and your audience.

You also need to take into account cost. Although considered to offer lower eCPMs than other ad formats, a banner ad has the benefit of being inexpensive, easy to create, and effective at reaching a larger audience.

The best advice is to try out a range of ad formats to see what works best for you. Focus on the user experience and play around with placement and frequency to find the sweet spot for you in terms of performance.

Choose the Right Advertising Partner

You also need to consider if you are using the right advertising partner, as this can have an impact on your eCPM. This is because each advertising partner sells inventory in their own way, which influences impact, cost, and revenue.

For example, traditional ad networks like Google AdSense often rely on waterfall and hybrid monetization models. Ad exchange networks like Google AdX allow publishers to advertise without intermediaries. In contrast, Supply-Side Platforms (SSPs) allow publishers to make money from their websites by creating and selling ad inventory to marketers. Using an SSP can often drive a higher eCPM as you are paired with the most valuable ad impressions.

Ultimately, you want to look for a monetization partner that offers you:

  • Access to relevant demand
  • Easy integration
  • High standards of ad quality to protect the UX
  • Experienced account managers who can help you maximize your eCPMs

Offer Rewards for Watching Ads

Another great strategy to boost your eCPM is offering rewards for watching ads. With ad rewards, users are offered an incentive to watch an ad from start to finish. Rewards might include virtual currency, points, extra lives, or completing a level faster.

This works for a variety of industries, but it is particularly effective in gaming apps. And, because users must opt-in and consent to them, you can push more aggressive and intrusive ads than you normally would. All that’s required in return is a user’s time and attention.

Here are some interesting stats that might convince you to give this format a try:

  • Players that watch rewarded video ads are 6 times more likely to complete in-app purchases
  • Rewarded video ads are perceived as the least disruptive out of all ad formats
  • The majority of mobile gamers prefer opt-in rewarded video ads over interstitial ads

Ultimately, when it comes to boosting your eCPM, the best strategy is to focus on increasing traffic, providing quality content, and improving user engagement. If users see value in your ads, then you will get more impressions and your revenue will increase accordingly.

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Pep Canals