The term eCPM, or effective cost per mille, is a key metric that publishers use to evaluate the revenue generated from every one thousand ad impressions displayed on their app or website. It is a measure of the effectiveness of their monetization efforts and helps them optimize their ad placements for maximum revenue. By tracking eCPM, publishers can monitor the performance of their monetization campaigns, identify areas for improvement, and make data-driven decisions to enhance their overall ad monetization strategy.

What is effective cost per mile (eCPM) and how does it differ from CPM?

To grasp the meaning of eCPM, it is important to start by understanding CPM, which stands for cost per mille (thousand). CPM represents the predetermined cost that advertisers assign to every one thousand impressions they receive.

CPM is a metric used by advertisers to allocate budgets and optimize campaigns.

On the other hand, eCPM refers to the cumulative revenue earned by a publisher for every one thousand impressions. Unlike CPM, which can be accurately calculated based on the total campaign spend and the number of impressions, eCPM is a dynamic calculation influenced by the forces of supply and demand.

eCPM encompasses two key aspects: monetization and user acquisition (UA).

• Monetization side of eCPM: On the monetization side, eCPM serves as a measure of a publisher’s ad monetization performance. A high eCPM indicates that the ads displayed on their app are performing well and effectively converting users. The concept is straightforward: higher conversion rates lead to increased competition for ad placements, resulting in higher payments for app developers.
• User acquisition (UA) of eCPM: eCPM quantifies the ad revenue generated by a specific campaign. Ad networks utilize eCPM to rank campaigns within their ad-serving models, giving prominence and frequency to campaigns with the highest eCPM scores. This strategy enables these campaigns to increase their volume of impressions and rapidly scale. Consequently, eCPM reflects the value of an impression and the purchasing power of a given campaign.

How to calculate effective cost per mille eCPM/eCPM formula

To calculate effective cost per mille (eCPM), you can use the following formula:

(Total earnings / Total number of impressions) x 1000 = eCPM

Let’s consider an example: a mobile app has earned $700 per day from ads and has served 200,000 ad impressions. We can calculate the eCPM as follows:

($700 / 200,000) x 1000 = $3.5 eCPM

This means that for every 1,000 impressions, the publisher (app developer) generates $3.5 in revenue.

What are the main advantages of eCPM metrics?

Effective cost per mille (eCPM) provides marketers with a way to assess the performance of each campaign while maintaining their reach. Understanding how these metrics are calculated helps marketers ensure they are following the most effective purchasing model.

In what scenarios is the eCPM model beneficial for publishers?

1. Running a direct response campaign: Effective cost per mille (eCPM) can help publishers evaluate the effectiveness of their direct response campaigns, allowing them to make data-driven decisions to optimize performance and maximize revenue.
2. Assessing the impact of app changes: Publishers can use effective cost per mille (eCPM) as a measurement tool to analyze how changes in their app, such as design or features, affect ad performance and revenue generation.
3. Comparing app performance to averages: Effective cost per mille (eCPM) enables publishers to compare the performance of their app over specific periods, such as monthly or yearly, against average eCPM values. This comparison helps identify trends and areas for improvement.
4. Universal measurement of revenue per impression: Effective cost per mille (eCPM) serves as a standardized metric for publishers to evaluate the revenue generated per ad impression served across different campaigns and platforms.
5. Critical indicator for campaign performance: Effective cost per mille (eCPM) acts as a key performance indicator (KPI) that reflects the efficiency and profitability of ad campaigns. Publishers can use it to gauge the success of their campaigns and make informed decisions for optimization.
6. Optimizing revenue streams: Since effective cost per mille (eCPM) is influenced by ad performance, publishers can leverage this metric to optimize their revenue streams. By analyzing eCPM trends and identifying factors that impact its fluctuations, publishers can make strategic adjustments to maximize their overall revenue.

What is an effective cost per mille (eCPM) floor?

An eCPM floor, also known as a flat eCPM or predefined CPM, is the minimum bid threshold that an advertiser or ad network must meet to serve an ad on a publisher’s website. It ensures that the winning bid meets a certain minimum value, typically set slightly higher than the second-highest bid, to maximize advertising revenue.

However, there is a caveat. The eCPM floor will only come into effect if the winning bid surpasses this minimum threshold. If none of the bids meet the publisher’s defined minimum, the ad will not be served, resulting in potential revenue loss.

eCPM floors can be established for specific geographical regions, device types, advertisers, ad formats (such as rewarded video, banner, interstitial, etc.), or even individual ads. It requires ongoing monitoring to ensure its effectiveness.

Setting up floor prices incorrectly can lead to revenue loss, but there are strategies to minimize such losses. One approach is to set a higher floor price for one ad network and a lower floor price for another. In this way, if neither network wins the bid, advertisers still have a fallback option to rely on.

It’s important to note that as the mobile app market progresses towards a pure in-app bidding monetization system, the relevance of eCPM floors will diminish over time. The industry is moving closer to a more advanced bidding mechanism, rendering the need for predefined floors less significant.

What factors contribute to a good Effective cost per mille (eCPM)?

Determining a “good” eCPM depends on several factors that influence the overall performance and revenue potential. Here are some key considerations:

1. Ad placement: The location of ad units on a webpage or app can impact the total volume of impressions and ultimately affect eCPM. Typically, ad units placed at the top of the page or in prominent positions tend to generate higher revenue.
2. Geolocation: Publishers operating in top-tier markets or regions with high demand often experience higher eCPM rates. Geographic location plays a role in advertisers’ willingness to pay for ad impressions.
3. User engagement: Mobile apps with engaged and loyal users can command higher prices for ad placements, resulting in increased eCPM rates. User engagement metrics, such as session duration, retention rates, and user activity, contribute to the perceived value of ad inventory.
4. Advertising format: Different ad formats have varying pricing dynamics. Video ads, for example, tend to be more expensive than standard display ads due to their higher effectiveness and conversion rates. Additionally, the placement of video ads can influence pricing, as some placements may be more valuable or incentivized than others.
5. Advertising channel: Native ads or sponsorships often yield higher revenue rates compared to traditional display ads. These formats provide a more seamless and integrated advertising experience, driving better engagement and monetization outcomes.
6. Seasonality: Certain events or holidays, such as Black Friday, Christmas, Valentine’s Day, and Mother’s Day, can significantly impact the volume of impressions bought by advertisers. Increased competition during these periods may lead to higher eCPM rates.

By cross-referencing these factors with historical year-over-year and month-over-month data, marketers can gain insights to assess what constitutes a good eCPM rate for their specific context. This analysis allows them to set realistic and objective targets for their monetization strategies.

KEY INFORMATION ABOUT EFFECTIVE COST PER MILLE (ECPM) TO REMEMBER

• While CPM helps you measure and monitor cost per campaign, eCPM is how you estimate whether you got bang for buck.
• eCPM is a metric used to measure an app developer’s ad monetization performance, or to measure the ad revenue generated by a specific campaign.
• Understanding how eCPM is calculated can help marketers ensure that they’re sticking to the most effective buying model.
• By combining historical data with factors such as ad placement, location, user engagement, seasonality, and ad format, marketers can accurately assess a good eCPM rate, and set realistic targets for their campaign optimization efforts.