Understanding the Metrics: RPM vs CPM
The digital marketing world has many facets to optimizing revenue. Two very common acronyms, RPM and CPM, are metrics that give publishers a tool to better understand their earnings.
RPM: Revenue per Mille (Revenue per Thousand Pageviews)
RPM is a publisher metric that allows them to estimate potential earnings of ad revenue. Advertisers do not pay based on RPM—the metric is there to give a better understanding of estimated earnings per 1,000 pageviews. The formula to calculate RPM is:
RPM = (estimated earnings / pageviews) * 1000
For example, if you had $10,000 in estimated earnings with 2,000,000 pageviews:
RPM = ($10,000 / 2,000,000) * 1000 = $5.00
RPM factors in all ad units on a page. Due to this, a publisher’s RPM will typically be higher than their CPM.
CPM: Cost per Mille (Cost per Thousand Impressions)
CPM is an advertiser metric that calculates how much campaign budget would be spent per 1,000 impressions on your website. If your website only has three ad units, and a visitor only views one of those ad units, then the CPM would be based off of that one ad impression, while the RPM would be based off of all three units. The formula for calculating CPM is:
CPM = (budget / impressions) * 1000
If an advertiser has a $10,000 budget and wants to purchase 5,000,000 ad impressions on your website:
CPM = ($10,000 / 5,000,000) * 1000 = $2.00
Similar to RPM, CPM is an estimate of how much an advertiser is willing to spend for an ad campaign on your website.
Which Metric Do I Use?
RPM is useful for understanding how much your website has the potential to earn and give insight into your site’s ad performance. However, too much focus on increasing RPM, by adding more ad units to your website, could cause a negative user experience and increase your bounce rate, resulting in less impressions and decreased ad viewability rates.
Publishers can increase CPM by optimizing ad viewability to improve the impressions of a website’s ad units. CPM also benefits from quality content that keeps users engaged and navigating the site.
A publisher’s earnings are driven by the number of ad impressions that occur, so use these metrics to create a good user experience with ad placements that perform well.
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