CPM and RPM are two metrics that help publishers track their revenue. While these two metrics are distinct from one another, they are often confused by new publishers.
Cost per mille (CPM) refers to the money an advertiser pays for every 1,000 times their ad is displayed. Whereas revenue per mille (RPM) measures the revenue that every 1,000 ad impressions generate.
Both CPM and RPM provide publishers important insights into advertising revenue and shape their publishing strategies.
We take a closer look at the differences between RPM and CPM, learn how they are calculated, and understand why each is important to publishers.
CPM vs RPM: The Full Overview
Advertisers use CPM to calculate the cost of running an ad campaign. Although a metric defined using the advertiser’s costs as the primary variable, publishers too can estimate their revenues from CPM.
RPM, on the other hand, is a metric primarily used by publishers to track the performance and earnings of an ad campaign.
Here's a table comparing RPM vs CPM.
What Is CPM?
CPM stands for cost per mille and represents the cost that an advertiser pays for every 1,000 ad impressions. An ad impression is counted each time the ad is shown to a user on a website or app. CPM provides publishers with an easy way to compare the cost of advertising across different ad networks and ad formats.
CPM is typically used for display advertising, where the advertiser pays for the ad to be displayed on a website or app, rather than for a specific action, such as a click or a conversion. It can also be used by advertisers to set a budget for their campaigns, as it allows them to estimate the cost of reaching a certain number of ad impressions.
CPM data allows advertisers to optimize their campaigns and adjust the ad targeting or creative elements to improve performance and reduce the cost per impression. Publishers can use CPM to set the pricing for their ad inventory, based on the estimated number of ad impressions their website generates.
CPM can further be of several types such as:
- Effective CPM (eCPM) which is a publisher centric metric measuring the ad revenue earned by the publisher per 1,000 impressions.
- Viewable CPM (vCPM) which measures the cost per 1,000 viewable ad impressions
- Revenue CPM (rCPM ) which calculates how much revenue a publisher generated per 1,000 ad requests
Some advertisers may also make use of an additional metric known as Target CPM (tCPM). However, this is a term that more accurately describes a bidding strategy specific to video campaigns in Google Ad Manager (GAM), rather than being a type of CPM.
How to Calculate CPM?
CPM is a useful metric to compare the cost of advertising across different ad networks and formats. However, you should note that CPM is independent of the quality or effectiveness of the impressions generated, and therefore should be used in conjunction with other metrics, such as click-through rates or conversions. It helps evaluate the overall success of an advertising campaign.
Formula to Calculate CPM
To calculate CPM, you need to know two variables: the total cost of the advertising campaign and the total number of ad impressions generated by the campaign.
The formula for calculating CPM is:
CPM = (Total Cost of Campaign / Total Number of Impressions) x 1,000
For example, let's say an advertiser paid $500 to run an ad campaign that generated 50,000 impressions. To calculate the CPM for this campaign, you would plug the variables into the formula as follows:
CPM = ($500 / 50,000) x 1,000
CPM = $0.01 x 1,000
CPM = $10
The CPM for this campaign would be $10, meaning the advertiser paid $10 for every 1,000 impressions on their ad.
Why Is CPM Important for Publishers?
By understanding the CPM rates of their platforms, publishers can set appropriate pricing for their ad space and optimize their ad revenue. Tracking CPM can provide several benefits for publishers, including
- Maximizing revenue: By tracking CPM, publishers can set correct pricing for their ad inventory and ensure they earn the maximum revenue for each impression generated on their platform.
- Identifying high-value advertisers: Publishers can use CPM data to identify advertisers that are willing to pay a premium price for their ad space.
- Optimizing ad formats: CPM can also help publishers identify ad formats that are performing well and generating better revenue.
- Making data-driven decisions: Tracking CPM provides publishers with valuable data they can use to make informed decisions about their ad strategy, pricing, and overall ad revenue maximization. Depending on the CPM, ad campaign metrics can be monitored and optimized.
What Is RPM?
RPM is a metric used to measure the estimated revenue earned for every 1,000 impressions. It includes all revenue earned from ads on a website, including display ads, video ads, and any other type of ad. RPM is a key performance indicator for publishers looking to maximize their ad revenue.
A closely related metric is called page RPM which estimates the revenue earned per 1,000 page views. Where RPM measures the revenue across the entire website, page RPM measures revenue from specific pages. It is a useful metric in cases where publishers need to zero in on the pages that are driving the most or the least revenue.
By providing accurate data for estimated ad revenue, RPM helps publishers understand the value of their ad inventory and make data-driven ad strategies. Publishers can also identify which ad formats and placements are generating the most revenue.
Additionally, publishers can use RPM to compare the performance of their ads across different ad exchanges and make informed decisions about where to allocate their advertising resources.
How to Calculate RPM?
It's important to note that RPM can depend on a variety of factors, including the type and quality of the ad inventory, the audience demographics, and the advertiser's demand. As a publisher, you should regularly monitor your RPM and adjust ad strategy as needed to maximize revenue.
To calculate RPM, you need to know two variables—the total ad revenue and the total number of page impressions.
Formula to Calculate RPM
The formula for calculating RPM is as follows:
RPM = (Total Revenue / Total Number of Impressions) x 1,000
Let's say your website earns $500 from ads and has 50,000 impressions. You can calculate the RPM for this website by entering the following variables in the formula above:
RPM = ($500 / 50,000) x 1,000
RPM = $0.01 x 1,000
RPM = $10
In this case, the RPM for your site would be $10. This means that the website earns $10 for every 1,000 impressions.
Similarly, to calculate page RPM, we can substitute impressions with page views in the formula above.
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Why Is RPM Important for Publishers?
RPM helps publishers calculate estimated earnings and make informed decisions based on accurate data. Here are some of the benefits of tracking RPM for publishers:
- Revenue optimization: RPM allows publishers to monitor ad revenue correctly, helping them identify which ad formats and placements are performing better. This way, publishers can optimize their ad strategy accordingly and maximize revenue generation.
- Comparison across platforms: Publishers can use RPM to compare their ad inventory's performance across different platforms and ad networks, helping them identify which networks are providing them with the best return.
- Efficient pricing: By using RPM data, publishers can understand the value of their ad inventory and set pricing for advertisers accordingly. This can lead to more profitable partnerships, and eventually, better quality ads.
- Insights into ad performance: RPM data provides valuable insights into the performance of ad campaigns beyond just revenue measurement. By analyzing RPM along with other metrics, such as click-through rates and conversions, publishers can calculate the success of their ad campaigns and make correct ad strategies for the future.
What’s the Difference Between CPM and RPM?
CPM is the cost of running an ad campaign per 1,000 impressions, while RPM is the revenue generated from ad campaigns on a website for every 1,000 impressions it receives.
Here are some of the other differences between CPM and RPM:
- Target: While CPM is an advertiser centric metric, RPM is a publisher centric metric.
- Tracking: CPM is useful to track the cost of an ad campaign, while RPM tracks the revenue earned from ads.
- Ad Placement: CPM is often used to determine the price of ads based on where they appear, while RPM is more focused on the overall revenue generated by ads across a website or app.
- Bidding: CPM is used in ad auctions provided by ad networks, such as Google AdSense, to determine the cost per impression of an ad while RPM isn't.
- Ad Units: CPM can be used to measure the cost per impression of different ads, while RPM measures the revenue earned from all ads.
- Pageviews: CPM, irrespective of its type, is based on impressions across a website or app while RPM also takes into account page views in case of websites when we measure page RPM.
It needs to be noted that CPM and RPM are calculated a little differently for YouTube publishers.
CPM is the cost per thousand impressions on the video before accounting for YouTube’s share. RPM is the publisher’s actual revenue per thousand impressions after accounting for YouTube revenue share. Publishers can track these and other metrics from YouTube analytics which can be accessed by signing into YouTube Studio and selecting Analytics from the menu.
RPM vs CPM: Which Is Better for Publishers?
While both CPM and RPM are important metrics for publishers, they serve different purposes.
RPM represents the revenue generated for every 1,000 impressions of ads on a publisher's platform and therefore is comparatively more important for publishers. It gives a more accurate view of how much revenue publishers are generating from their ads, allowing publishers to optimize their ad placements and formats.
Also, since RPM also takes into account page views, publishers can increase page RPM by optimizing page-related metrics such as website speed and content quality.
That being said, keeping an eye on CPM is also important for publishers. CPM is an indicator of ad quality and can directly impact the user experience on a website or app. A low CPM may indicate that the ads are not relevant or engaging, which may result in less clicks.
Another important thing you should note is that RPM doesn't tell the whole story. It's solely based on all of the page’s ad units regardless of whether or not they received impressions.
Therefore, it's essential that you consider both RPM and CPM to ensure there's good ad revenue with a positive user experience.
As a publisher, you should focus on maximizing RPM but at the same time, keep an eye on CPM to ensure ad quality and user experience.
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RPM vs CPM: FAQs
Is CPM Equal to RPM?
CPM is not equal to RPM. CPM represents the cost to the advertiser, while RPM represents the revenue earned by the publisher.
Is High CPM Good for Publishers?
Yes, a higher CPM means that advertisers are willing to pay more to run their ads on your platform. It can result in higher revenue for publishers. A high CPM may also indicate that the ads being displayed are relevant and engaging to the audience and that advertisers are willing to invest in advertising.
Why Is RPM Generally Higher Than CPM?
RPM is generally higher than CPM because it is calculated by adding several other factors to the cost per 1,000 impressions. RPM includes CPM and also other metrics such as click-through rate (CTR) and the revenue share percentage that the publisher receives from the ad network or platform.