What is an eCPM?
Quick Definition: eCPM, or effective Cost Per Mille, is a publisher-facing metric showing the total ad revenue earned for every 1,000 ad impressions. It is used to measure the value of ad inventory and compare performance across all campaign types (like CPI or CPC). Publishers use it to optimize their monetization strategy.
An Introduction to eCPM
Think of eCPM as the average “price tag” on a batch of 1,000 ad impressions shown on your platform. It is one of the most important metrics for an ad publisher because it answers the fundamental question: “For every 1,000 times an ad is displayed to my users, how much revenue do I actually earn?”
A high eCPM indicates that your ad inventory is valuable to advertisers, while a low eCPM suggests that the combination of your audience and ad placements is generating less revenue. It is a measure of performance and value.
The “Effective” in eCPM: Why It Matters
The “e” for “effective” is what makes this metric so powerful. Advertisers buy ad space using different pricing models:
- CPM (Cost Per Mille): They pay for 1,000 impressions.
- CPC (Cost Per Click): They only pay when a user clicks the ad.
- CPI (Cost Per Install): They only pay when a user installs an app.
- CPA (Cost Per Action): They only pay when a user completes a specific action, like a signup.
A publisher doesn’t want to compare apples and oranges. eCPM solves this by converting the revenue from all these different models into one single, universal metric, allowing for direct comparisons.
Example: An advertiser runs a CPI campaign on your app and agrees to pay you $2.00 for every install. The campaign gets 50,000 impressions and results in 100 installs.
- Total Revenue = 100 installs × $2.00/install = $200
- Your eCPM for this campaign is ($200 ÷ 50,000 impressions) × 1,000 = $4.00.
Even though the advertiser paid per install, you can see the campaign’s effective value was $4.00 per 1,000 impressions.
How to Calculate eCPM
The formula is a standard for the industry:
eCPM = (Total Ad Revenue / Total Impressions)×1,000
For example, if you earned $5,000 in a day from 500,000 total ad impressions across all campaigns, your eCPM for that day would be $10.
The Strategic Role of eCPM
Publishers use eCPM in several critical ways:
- Evaluating Inventory Value: It’s a direct indicator of how valuable your audience and ad placements are to the market.
- Comparing Performance: It provides an apples-to-apples way to compare revenue performance between different ad networks, direct partners, ad formats, and even specific countries.
- Powering Ad Mediation: In a traditional ad mediation “waterfall,” eCPM is the primary metric used to rank ad networks, with the highest eCPM network getting the first chance to fill an ad request.
Why is eCPM Important for Publishers?
- Evaluating Inventory Value: It’s a direct indicator of how valuable your audience and ad placements are to the market.
- Comparing Performance: It provides an apples-to-apples way to compare revenue performance between different ad networks, direct partners, ad formats, and even specific countries.
- Informs Monetization Strategy: By analyzing eCPM by country, device type, and ad placement, publishers can make strategic decisions about where to focus their efforts to maximize their Ad Monetization.
Related Terms
- Ad Monetization: The primary goal of any ad monetization strategy is to maximize eCPM.
- Ad Mediation: The technology used by publishers to automatically prioritize the ad source with the highest eCPM for each ad request.
- Ad Publisher: The entity that lives and breathes by the eCPM metric.
