The digital ad tech space is filled with jargon and acronyms designed to add a little confusion to your day. CPM, eCPM and rCPM and RPM. What does it all mean? Is there a difference? And which one should publishers be focusing on to get as many impressions as possible to maximise their total ad revenue?
At the end of the day, each of these metrics gives advertisers and publishers different perspectives and insights into how, where and why their advertising money is generated.
Let’s break down each of these ad impression metrics and explain how they are calculated, what they are used for, and which metrics publishers should be using to increase yield as they monetize their sites.
What is CPM?
CPM, is an acronym for cost per mille, meaning cost per 1000 impressions. How much money is paid in a CPM deal is calculated by multiplying the CPM rate by the number of impressions.
For example, one million impressions at CPM equals 1000 in gross revenue. Before the evolution of header bidding, this was often the metric publishers and advertisers would use to evaluate which demand partners would get priority in the waterfall system. Partners offering a high CPM for ad impressions in the previous week would be evaluated as the best people to offer impressions to first in order to maximise revenue.
What is rCMP?
rCPM, stands for real CPM, or true CPM as we like to call it, and it is extremely useful for publishers and advertisers alike. RCPM shows publishers the true value they are getting from an ad partner based on the number of impressions their ad units are getting, not just the ones the ad partner is agreeing to pay for. Agreed upon CPMs can often hide this kind of information. This is particularly important when using the waterfall system of ad serving where decisions on the top partner are often made based on the CPM a partner is willing to offer.
rCPM = revenue/(total impressions/1000)
If a site gets 100,000 impressions a day, its ad partner has the highest priority in the waterfall system and 100,000 opportunities to purchase ad inventory. If they fail to fill those ad impressions, that is lost ad revenue that should be factored into any decision on what demand partners to prioritize within the waterfall.
Let’s look at a calculation of the revenue received from an ad partner.
$400/(100,000/1000) = $4
So we are in fact not getting the agreed upon cpm from this partner. We only monetized 80% of our available inventory so we only really received $4 for all available impressions. By calculating the rCPM publishers can better evaluate their ad partners and see where they may be losing out on possible revenue. Certain partners may not have a low fill rate despite appearing to have higher CPMs.
This information can then be used to put frequency caps on certain ad partners until their fill rate increases and to use the rCPM as the floor price for a network in order to have more ads filled and generate a higher total revenue.
What is Page RPM?
Page RPM, or revenue per 1000 page impressions, is Google AdSense’s default reporting metric. It is calculated by dividing total ad revenue by the number of page views received, then multiplying by 1000. The page RPM metric shows the revenue by page of a website, while CPM is a metric per ad unit. As a rough rule, RPM will always be higher than CPM because it's an aggregate of all ad units on a page.
eCPM and Ad Impressions
eCPM, or effective cost per mille, takes into account how many impressions were actually paid for. eCPM will be specific to each of a publisher’s ad sources and is used to show what the value of your ad inventory is, based on the number of impressions your ad partners purchased. eCPM is calculated by dividing the total earnings by the total number of impressions in thousands. It is a great performance measure for each of a publisher’s ad units, allowing them to compare results. The formula is revenue/(paid impressions/1000).
Is rCPM Relevant With Header Bidding?
Even with header bidding, true CPM can be a useful metric for measuring and evaluating different partners. Despite the fact that demand partners all now bid on an impression simultaneously, ad impressions can go unfilled by partners that win the auction. Ad partners may win the auction but users may navigate away from the page before the ad has time to load, leaving the impression unfilled. This kind of discrepancy can only be accounted for when using the rCPM and will generate a lower level of revenue generated from that partner than the traditional CPM which can hide this discrepancy.
What Factors Influence These Metrics?
People are perhaps the most important influencers when it comes to the amount of publisher’s ad requests sold. Without users, there would be no one to serve ads to in the first place.
Furthermore, the type of users can have an impact on the total ad value. While some may bounce quickly, others may generate more page views and hence more impressions. Whether they implement ad blocking technology and allow third party cookies can also affect advertiser bids.
Many site owners mistakenly take page views to be the key factor in growing RPM, however this is not always the case. Some sites may have many page views, but few total ad requests on offer. This is also affected by whether a visitor navigates to the site via mobile or desktop. A page view on a mobile site may have three ad requests, while a desktop may have even five ad requests.
The final and perhaps most pivotal factor affecting ad ops metrics are ad requests.
Without an ad request, there is no opportunity to fill an ad unit. The important thing for a website publisher to note is that they should not expect ad requests to have the same value over time. It will change due to varying factors, which is why rCPM can be so important for measuring performance.
rCPM in Digital Advertising: An Example
You are a publisher working in the digital advertising space, and you agree on a CPM of (X). If your website gets 100,000 ad impressions a day and your ad partner fills 80% of the total impressions available, giving you a total of 80,000 paid impressions, then you collect $400 in gross revenue a day. Your ad partner has left you with 20% of your inventory unfilled. And lost impressions ultimately mean many publishers are losing money unnecessarily. When we use rCPM we look at the total impressions that you made available to your ad partner, regardless of the unfilled impressions. not just the ones they decided to fill.
What We Use at Publift
In our Publift dashboard, we use true CPM to provide publishers with as much transparency as possible as to where their ad revenue is coming from in order to track ad performance and maximise gains from every last ad impression their website gets.