RPM vs CPM

Blog
February 24, 2023 | by Aleesha Jacob
rpm-vs-cpm

When comparing RPM and CPM, there are a few clear distinctions to make. RPM is a metric used to determine the total ad revenue a publisher is set to earn for 1000 ad impressions. CPM, on the other hand, is the amount an advertiser will pay for 1000 ad impressions. Though the two are used interchangeably across the digital media industry. In this guide, we’ll unpack the meaning of each metric and help you work through any confusion you may have surrounding these key terms. By the end of the guide, you’ll be able to speak confidently about these metrics and impress your team! Let’s jump in…

RPM

rpm_revenue_per_mile

RPM or Revenue Per Mille is the cost for every 1000 pageviews. It effectively indicates what a publisher makes from their site’s total traffic.

It’s considered a publisher metric because, unlike CPM, RPM takes into account a site’s page views and doesn’t rely on ad impressions alone.RPM also takes into account all of the ads on your site’s pages.

It can be mistaken as a payment figure, but in reality, it’s more of an estimation of what the publisher could earn from ad revenue. Since it’s an estimation, it may not always be how much a publisher will get paid for their ad impressions.

RPM is calculated as follows:

RPM = (Estimated earnings / Number of page views) * 1000

Here’s a simple example to explain RPM further: Let’s say your estimated earnings are $10,000 from 10,000,000 impressions; then you can calculate your RPM as:

($10,000 / 10,000,000)*1000 = $1.00 RPM

On the other end, if your estimated earnings were $7,650 for 6,000,000 impressions, the RPM for that page would be:

($7,650/6,000,000)*1000 = $1.275 RPM

Related Read: https://www.monetizemore.com/blog/what-is-rpm-session-page-ad/

Maximizing your ad revenue through RPM optimization

  1. Optimize your ad placement: Experiment with different ad placements and formats on your website to determine what works best for your audience. Place ads in high-visibility areas and ensure they do not obstruct the user experience.
  2. Use ad networks that pay well: Research different ad networks and choose the ones that offer the best RPM rates for your website’s niche and audience.
  3. Use responsive ads: Responsive ads adapt to different screen sizes and devices, making them more likely to be seen by your audience. This can lead to higher engagement and ultimately, higher RPM rates.
  4. Increase website traffic: The more traffic your website receives, the more ad impressions you can generate, leading to higher RPM rates. Focus on creating high-quality content that drives organic traffic to your website.
  5. Target high-paying ads: Use ad targeting tools to display ads that are relevant to your audience and pay higher rates. For example, if your website caters to a high-income demographic, you can target ads for luxury products and services.
  6. Optimize for mobile: Mobile devices are increasingly being used to browse the internet, so make sure your website is optimized for mobile devices. This includes having mobile-friendly ad formats and placements.
  7. Track and analyze your RPM: Monitor your RPM rates and identify any trends or patterns. Use this data to make informed decisions about your ad strategy and to continually optimize your RPM rates.

CPM

cost_per_mile_CPM

CPM or Cost Per Mille is the cost for every 1000 impressions that advertisers interested in your inventory are willing to pay. Almost everyone in the digital marketing industry will be familiar with what CPMs are. However, this is generally considered an advertiser-side metric since it’s effective in tracking expenses for campaigns.

Most people across the industry are familiar with this term, and it’s misused rampantly on the publishing side as it’s an advertiser-side metric to track. CPM ads differ from CPC ads. Every time a CPM ad gets served on a publisher’s website, the publisher earns ad revenue from it. With CPC ads, every time an ad is served on the publisher’s website and a user clicks on it; the publisher earns ad revenue. To calculate the CPM, use the following formula:

CPM  = (Cost of the campaign/ Number of total impressions) * 1000

Here’s a simple example to further explain CPM: Suppose the advertiser has a $10,000 ad budget. They launched a CPM ad campaign and received 10,000,000 impressions for their ad campaign.

What’s the advertiser CPM then?

CPM = ($10,000/10,000,000)*1000 = $1.00

For more information on CPM, read our blog post about CPM vs. ECPM here: https://www.monetizemore.com/blog/cpm-vs-ecpm/

Common misconceptions about RPM and CPMs

  1. RPM and CPM are the same thing: This is a common misconception among publishers and advertisers. RPM and CPM are not the same thing, and they measure different things. RPM is the estimated earnings a publisher can earn for every 1000 impressions received, while CPM is the cost per 1000 ad impressions to the advertiser.
  2. RPM is the exact amount a publisher will earn: RPM is an estimation of what the publisher could earn from ad revenue. Since it’s an estimation, it may not always be the exact amount a publisher will get paid for their ad impressions.
  3. CPM is the only metric that matters: While CPM is an important metric for advertisers, it’s not the only metric that matters. Publishers should focus on RPM as it tells them how much they can earn for every 1000 ad impressions.
  4. Higher CPM always means more revenue: A higher CPM does not always mean more revenue for publishers. Publishers should focus on optimizing their RPM, which takes into account both CPM and ad fill rates.
  5. RPM and CPM are the only metrics that matter for ad revenue: There are other metrics that publishers should focus on to maximize their ad revenue, such as click-through rate (CTR), viewability, and engagement. Publishers should use a combination of these metrics to optimize their ad revenue.

RPM vs. CPM

RPM

CPM

 

also known as Revenue Per Mile

 
 

also known as Cost Per Mile

 
RPM’s various modes: 1. Impression RPM 2. Ad RPM 3. Page RPM 4. Ad-Request RPM CPM’s two modes: 1. CPM 2. eCPM eCPM=CPC*CTR*1000) (eCPM metrics basically evaluates your AdSense paycheck)
 

Google AdSense enlightened RPMs

 
 

CPM is well-known because of header bidding

 
 

Calculates publisher’s total ad revenue

 
 

Calculates advertiser’s cost price

 
                                                           Table 1: RPM vs CPM

Factors that can affect your RPM and CPM

Here are ten factors that can affect a publisher’s RPM and CPM:

  1. Ad placement: The placement of ads on a publisher’s website can impact their RPM and CPM. Ads placed in visible and prominent locations tend to perform better than those that are hidden or difficult to find.
  2. Ad format: Different ad formats have varying RPM and CPM rates. For example, display ads typically have lower rates than video or native ads.
  3. Ad quality: The quality of the ads displayed on a website can impact RPM and CPM. Low-quality ads or those that are not relevant to the audience can result in lower revenue.
  4. Geographic location: The geographic location of a website’s visitors can impact RPM and CPM. Advertisers may be willing to pay more to target visitors from certain regions or countries.
  5. Niche or topic: The niche or topic of a website can impact RPM and CPM rates. Websites that cover popular and lucrative niches tend to have higher rates than those in less popular or saturated niches.
  6. Seasonality: The time of year can impact RPM and CPM. Certain seasons, such as the holiday season, tend to see higher ad spend and thus higher RPM and CPM rates.
  7. Traffic volume: The amount of traffic a website receives can impact RPM and CPM. Websites with higher traffic earn more revenue than those with lower traffic.
  8. User behavior: User behavior, such as ad click-through rates and bounce rates, can impact RPM and CPM. Websites with engaged and active users tend to have higher revenue.
  9. Ad block usage: The use of ad blockers can impact RPM and CPM rates. Websites that have a high percentage of users who block ads may see lower rates.
  10. Ad network or exchange: The ad network or exchange used by a publisher can impact RPM and CPM rates. Different networks and ad exchanges have varying rates and may be more suitable for certain types of websites.

The relationship between RPM, CPM, and fill rate

RPM, CPM, and fill rate are all important metrics that publishers use to evaluate their ad performance and revenue. RPM (revenue per thousand impressions) and CPM (cost per thousand impressions) are measures of how much revenue a publisher generates for every thousand ad impressions served. Fill rate, on the other hand, measures the percentage of ad requests that are filled with ads.

The relationship between RPM, CPM, and fill rate is complex and interdependent. In general, higher CPMs and fill rates can lead to higher RPMs, but there are many factors that can affect this relationship. For example, a publisher with a high fill rate but low CPMs may have a lower RPM than a publisher with a lower fill rate but higher CPMs.

It’s important to note that the fill rate alone does not determine RPM or CPM. A low fill rate can lead to lost revenue opportunities, but it’s possible to still have a high RPM or CPM if the ads that are served are highly targeted and valuable to advertisers. Publishers need to optimize all three metrics to maximize their ad revenue. This may involve adjusting ad formats, targeting specific audiences, and experimenting with different ad networks and platforms to find the best combination of RPM, CPM, and fill rate.

The future of RPM and CPM in digital advertising

The future of RPM (Revenue per thousand impressions) and CPM (Cost per thousand impressions) in digital advertising looks bright. As the digital advertising industry continues to grow, the demand for better targeting and measurement capabilities is increasing, resulting in higher RPMs and CPMs for publishers.

One of the key drivers of RPM and CPM growth is the increasing popularity of programmatic advertising, which allows advertisers to target their ads to specific audiences with greater precision. As programmatic advertising becomes more sophisticated, advertisers will be willing to pay higher prices for impressions that are more likely to lead to conversions. Another factor that will drive RPM and CPM growth is the rise of mobile advertising.

Advertisers shift their focus towards mobile ads as more people access the internet through their mobile devices. Since mobile screens are smaller, ads have less real estate, so publishers can charge more for each impression. Furthermore, adopting new solutions like CHATGPT & DALL-E will create new opportunities for advertisers to engage with their target audiences. These technologies will provide advertisers with new ways to deliver highly targeted and immersive ad experiences, which will command higher RPMs and CPMs.

In addition, the increasing importance of privacy and data protection regulations is leading to a shift towards first-party data collection and targeting. This will allow publishers to offer highly targeted ad inventory, which will result in higher RPMs and CPMs. Finally, the ongoing shift towards a cookieless future in digital advertising will require new approaches to targeting and measurement. This will create new challenges and opportunities for publishers to differentiate themselves and command higher RPMs and CPMs.

In conclusion, the future of RPM and CPM in digital advertising looks promising, with new technologies and targeting capabilities driving higher prices for publishers. However, publishers must stay on top of industry trends and adopt new technologies to maximize their ad revenue potential.

Conclusion

As a publisher in programmatic advertising, your primary goal is likely to generate revenue and maximize profitability. While CPM can be an important metric for advertisers to track, focusing solely on this metric can sometimes lead to suboptimal revenue generation for publishers. Instead, we recommend that publishers focus on the RPM metric, which considers both ad impressions and revenue earned.

By focusing on RPM, publishers can better understand how their ad inventory is performing and make informed decisions about pricing and inventory management. Additionally, by maximizing RPM, publishers can increase their overall revenue and profitability, ultimately the end goal of any advertising strategy.

While CPM is certainly an important metric, it only tells part of the story. By focusing on RPM, publishers can get a complete picture of their ad performance and make better decisions about their advertising strategy. So, if you’re looking to maximize revenue and profitability, we recommend that you shift your focus to the RPM metric and start reaping the benefits today.

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FAQ

What is the difference between CPM and RPM?

RPM is the estimated earnings a publisher can earn for every 1000 impressions received. CPM is the cost per 1000 ad impressions to the advertiser. Find out more about both metrics in our blog post.

What is CPM calculation?

CPM = (Cost of the campaign/ Number of total impressions) * 1000.

What is RPM in ads?

RPM is a metric used to determine the total ad revenue a publisher is set to earn for 1000 ad impressions. Find out more about RPM in our blog post.

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