eCPM (Effective cost per mille)
eCPM, or effective cost per mille, is the revenue earned by a publisher (app developer) for every one thousand ad impressions displayed on their app. Publishers use eCPM to optimize ad placements, monitor monetization campaigns, and measure overall ad monetization performance.
What is eCPM (and how is it different from CPM)?
To understand what eCPM means, we first need to define CPM, or cost per mille (thousand), which is the pre-defined cost advertisers associate with every one thousand impressions they receive.
CPM is an advertisers’ side metric that helps in budget allocation and optimization for campaigns.
eCPM, on the other hand, is the cumulative revenue earned by a publisher for every one thousand impressions. As opposed to CPM which can be accurately calculated given the total campaign spend and number of impressions, eCPM is a dynamic calculation that is affected by the forces of supply and demand.
There are two aspects to eCPM: monetization and user acquisition (UA).
- On the monetization side – eCPM is used to measure a publisher’s ad monetization performance. If app developers are showing a high eCPM, this means that the ads served on their app are performing well and converting users.
The flow is simple: the higher the conversion rates, the fiercer the competition on ad placement would be, the more app developers get paid.
- On the UA side – eCPM measures the ad revenue generated by a specific campaign. Using eCPM to rank campaigns within their ad serving models, networks serve the highest eCPMs-scored campaigns prominently and frequently, enabling these campaigns’ to boost their volume of impressions and scale quickly.
In this way, eCPM signifies the effective value of an impression, and a given campaign’s buying power.
How to calculate eCPM?
eCPM can be calculated using the following formula:
(Total earnings / Total number of impressions) x 1000 = eCPM
If, for example, a mobile app’s total ad earnings are $700/day, and they have served 200,000 ad impressions, their eCPM will be calculated in the following way:
($700 / 200,000) x 1,000 = $3.5 eCPM
In other words, for every 1,000 impressions, the publisher (app developer) will generate $3.5 in revenue.
What are the primary benefits of this metric?
eCPM can help marketers evaluate the performance of each campaign without jeopardizing reach. Understanding how these metrics are calculated can help marketers ensure that they’re adhering to the most effective buying model.
When is the eCPM model useful for publishers?
- When running a direct response campaign
- When looking to evaluate the impact of changes in your app
- When comparing app performance to monthly or yearly averages
- When in need of a universal measurement of revenue per served impression
- When in need of a critical indicator for campaign performance
- When looking to optimize revenue streams, given that eCPM is affected by performance
An eCPM floor, also called a flat eCPM or predefined CPM, is the minimum CPM bid an advertiser or ad network must meet to serve an ad on a publisher’s site. Usually, the winning bidder pays $0.01 more than the second-highest bidder, which is an effective strategy to increase advertising revenue.
But here lies a catch. The pricing floor will only go into effect if the winning bidder is above it. In other words, if none of the bids meet the minimum defined by the publisher, the ad won’t be served, and revenue will be lost.
eCPM floors can be defined for geographical regions, device types, advertisers, ad types (e.g rewarded video, banner, interstitial, etc.) or even per individual ads, and require constant monitoring to ensure effectiveness.
Setting up the floor prices incorrectly can easily result in revenue loss, although there are plenty of ways to minimize losses.
One way is to set a floor price for one network, and a lower floor price for another, in which case if neither wins the bid, advertisers can still have a fallback option to rely on.
On a more general note, it’s important to keep in mind that while the mobile app market is still operating in a hybrid bidding system, as the industry moves closer to a pure in-app bidding monetization, eCPM floors will become less and less relevant over time.
What is a good eCPM?
The “golden formula” depends on a number of factors. Some of which are:
- Ad placement – which can affect the total volume of impressions. Generally speaking, ad units placed at the top of the page will generate more revenue.
- Geo location – publishers working in top tier markets tend to see higher eCPM rates.
- User engagement – a mobile app with engaged, loyal users will be able to demand higher prices, which will result in higher rates.
- Advertising format – video ads are more expensive than standard display ads, yet substantially more effective, usually resulting in higher conversion rates. Another factor that can have a major impact on prices is video ads’ placement, as some placements are incentivized and some are not.
- Advertising channel – native ads or sponsorships usually generate higher revenue rates than display ads.
- Seasonality – certain events can increase or decrease the volume of impressions bought by advertisers. Black Friday, Christmas, Valentine’s Day, Mother’s Day and other commercial-oriented holidays, all fuel up the competition for space on most publishers’ platforms.
By cross-referencing the above factors with historical year-over-year and month-over-month data, marketers can accurately assess a good eCPM rate, as well as set realistic and objective targets for their monetization strategy.
User acquisition (UA) toolkit for 2023
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- 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.