There are several ways in the digital marketing world to monitor ad revenue. Two of the most common monetization metrics are RPM and CPM.
Both RPM and CPM are an important publisher and advertiser metrics to track. Publishers generally track RPM, which measures revenue per thousand ad impressions. On the other hand, advertisers track CPM, which measures the cost per thousand impressions.
You’ll want to keep track of how your ad inventory is generating revenue. The two metrics give you a way to assess performance. Whether you are using Google Ads, Google AdSense, or other ad networks, looking at YouTube analytics and video views, or measuring revenue generation from any of the wide ranges of possible sources, RPM and CPM are standardized ways to judge performance.
In other words, regardless of how you plan to make money from your website ads or digital products, these two metrics are a good way to assess how well any platform is doing.
What is RPM?
RPM stands for revenue per mille, or how much a publisher earns revenue for every thousand impressions. RPM helps website owners, publishers, and bloggers understand how much money they are making or could potentially earn based on the number of page views they can deliver. You may also hear this called Session RPM or earnings per thousand visitors (ePMV).
How To Find Your RPM
You can use the following formula for estimated revenue in an RPM model:
RPM = ( Total revenue / Number of page views ) x 1,000
For example, if your estimated earnings are $200 based on 50,000 ad impressions, your RPM would be:
( $200 / 50,000 ) x 1,000 = $4
In this case, your estimated revenue would be $4 for each 1,000 ad impressions based on $100 total revenue and 50,000 impressions.
The RPM metric is a good publisher metric because it can help you estimate traffic revenue. So, if you know your average page RPM is $4 and you typically generate 250,000 impressions monthly, your estimated earnings would be ( $4 x 250,000 ) / 1,000 = $1,000.
One reason this is important to track is that it also helps publishers understand what they earn after any fees are paid to third parties. That’s why even though RPM and CPM sound almost identical, RPMs that publishers get paid are lower than the CPMs advertisers pay due to the additional costs that are accrued by third-party providers in procuring, serving, and administrating the ad process.
You may also see an impression RPM identified as an eCPM. In this case, CPM stands for the effective cost per mille (cost per thousand). Despite the name, it shows the same thing: how much money is earned by website publishers after any costs for displaying the ad from third parties is subtracted.
For example, Google AdSense keeps 22% of its ad revenue from advertisers, passing on 68% to publishers. So, RPM with AdSense would be 22% less than CPMs. Many ad networks have far more favorable terms for advertisers, so it’s wise to seek out alternatives to Google AdSense to optimize your revenue.
As a website owner, publisher, or blogger, you can use several strategies to significantly increase your RPM from your digital advertising.
What is CPM?
CPM is the cost per mille, or cost per thousand impressions. Advertisers use the CPM metric to track and monitor the expenses associated with any impression ad campaign. This is the cost that the advertiser pays.
It’s also important for publishers to keep an eye on as well because it shows the amount of the average winning bid for ad space on your website in programmatic advertising and what advertisers are willing to pay. Comparing RPM to CPM is also valuable because it can show you the difference between what advertisers pay and what you actually earn.
How To Find Your CPM
Here’s how you calculate your CPM cost:
CPM = ( Cost of the campaign / Number of impressions ) x 1000
For example, if an advertiser pays $2,000 on a CPM ad campaign to achieve one million impressions, your CPM would be:
( $2,000 / 1,000,000 ) x 1,000 = $2 CPM.
Most ad networks and ad exchanges provide a CPM Calculator to make it easy for advertisers to decide what they want to bid for their ad campaigns. CPM also gives advertisers a way to evaluate their different options for placing ads and determining how to get the most value out of their digital advertising campaigns.
The Key Differences Between RPM & CPM
RPM and CPM are very similar metrics, but there are key differences.
|Definition||Used by publishers, RPM defines the revenue generated for each 1,000 ad impressions.||Used by advertisers, CPM defines the cost for each 1,000 ad impressions.|
|Use||Publishers analyze the total earnings from ad revenue and compare different ad networks, placements, etc.||Advertisers use CPM to determine the cost and efficiency of various impression ad campaigns.|
|Cost/Earnings||Publishers get paid the RPM, which also includes the cost of ad networks or brokers.||Advertisers are billed based on the cost per 1,000 ad impressions.|
|Optimization||Publishers can optimize RPM earnings by using multiple ad units and testing different types of ads, including banner ads, display ads, image ads, and video ads.||Advertisers use AI and ad exchanges to target audiences based on the CPM parameters they set.|
RPM is most commonly tracked in Google AdSense or other ad networks and platforms, although WordPress users can also view estimated earnings in the admin platform if they link their AdSense account to WordPress.
RPM can vary greatly depending on ad type, viewability, and web page placements. Publishers want to want to make sure they test various ad units and placements to optimize potential revenue. It’s important to note that publishers receive payment for views/impressions. For example, if you place an ad unit at the bottom of the page and the visitor never scrolls to the bottom, it will not register as an ad impression and generate revenue.
While there are multiple strategies to employ to optimize revenue from website ads, you also have to pay attention to the user experience (UX). If you put too many ads on your website or use intrusive ads that negatively impact the viewing experience, it can hurt your reputation and increase your bounce rate.
Real-time bidding uses CPM for auctions. Advertisers set a target CPM rate for their bid for an ad impression campaign. This is especially important for header bidding, which puts CPMs into competition with other advertisers. As ad networks like Newor Media use header bidding to maximize potential revenue for publishers, only the highest bidders get chosen. So, if advertisers choose too low of a CPM for their bid, their ads may not be shown.
Publishers and advertisers follow RPM and CPM to evaluate the effectiveness of their advertising efforts. Publishers can easily measure their earnings. Additionally, advertisers can see how much they are spending to reach target audiences.
Newor Media provides metrics such as these in their detailed publisher platform, so you always know where you stand and your potential earnings. We also make it easy for publishers to grow their monetization strategy and earn the highest possible revenues from the ads that run on their sites.
If you are wondering how much you might earn from your website ads, try our free website earnings calculator to see your potential revenue.