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Guide to eCPM and RPM and Best Way to Calculate it

eCPM stands for ‘effective cost per Mille’ (effective cost per thousand impressions). This is the basis of calculations from the side of advertisers to know what cost of his admix going to be. As the marketer is interested to know the cost of his ad campaign, he needs to have information about the cost that he is likely to incur and eCPM is the right tool for him to decide the marketing mix and ad campaign as well.

It is here that the advertiser must do the necessary ground work to find out which channel is charging how much for an ad campaign.  It is not always necessary that the higher CPM would give higher returns for the advertiser.

RPM, on the other hand, stands revenue per thousand impressions. This is the publishers’ calculations to find out the performance of their channel/web property. The publisher spends a huge amount to run his channel and naturally, he wants to earn through this channel. RPM is an indication of the performance of his channel and as the RPM goes up, the publisher can charge more from the advertiser. Here the advertiser has to play very carefully to enhance RPM of his channel. Higher RPM is naturally higher the charge the publisher can demand from the advertiser.

Now the question comes regarding calculation of RPM. The simple formula for this calculation is RPM = (Total Revenue) / (Total Impressions) x 1000. A small example would amply clarify the calculation of RPM.

Ex. Advertiser A pays $ 2 per click. The ad generated 50 clicks on 20,000 page views meaning the publisher earned $100 (50 clicks x $2 per click). Here the RPM = ($100/20,000) x 1000 = $5.

In another instance advertiser B pays $3 per click. The ad generated 20 clicks on 20,000 page views meaning the publisher earned $60 (20 clicks x $3 per click). Here the RPM = (60/20000) x 1000 = $3.

Here the advertiser A performs better because his RPM is higher @ $5.

The publisher is naturally interested in improving his RPM. This can be done by twin strategy i.e., 1) suitably increasing the target and 2) find out opportunities to recruit advertisers.

Kiran Voleti

Kiran Voleti is an Entrepreneur , Digital Marketing Consultant , Social Media Strategist , Internet Marketing Consultant, Creative Designer and Growth Hacker.

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