There are many terms used in the world of advertising and understanding the important terms help to understand the performance reports of the advertisements. RPM and CPM are two such frequently used terms for publishers and advertisers. In this article we will discuss what is RPM / CPM, types of RPM / CPM and the formula for calculating them. The explanations are based on the popular advertising programs AdSense for publishers and AdWords for advertisers.
RPM Vs CPM – Summary
Here is a summary of what does RPM and CPM means in advertising.
| RPM | CPM |
|---|---|
| Stands for Revenue Per Mille. | Stands for Cost Per Mille. |
| Also referred as Revenue Per Thousand Impressions. | Also referred as Cost Per Thousand Impressions. |
| Types: 1. Page RPM 2. Impression RPM 3. Ad RPM 4. Ad Request RPM | Types: 1. CPM 2. eCPM |
| Used to measure revenue of publishers. | Used for measuring cost to advertisers. |
| Used in publisher’s reporting like AdSense. | Used in advertiser’s reporting like AdWords. |
Revenue Per Mille (RPM)
RPM stands for revenue per mille which is generally expressed as revenue per 1000 impressions. The word “mille” means thousand in Latin. RPM is the estimated earnings a publisher will earn for thousand page views or impressions. The formula for calculating RPM is as below:
RPM = (Estimated earnings / Number of page views or impressions) * 1000
Types of RPM
There are different aspects of calculating RPM for different properties. Generally RPM is used in performance reports for the following four cases:
- Page RPM
- Impression RPM
- Ad RPM
- Ad Request RPM
Below is the AdSense performance report with custom metrics showing all types of RPM:
Page RPM
Page RPM or page revenue per 1000 impressions is the estimated earnings generated by a web page displaying AdSense ads for every 1000 page views.
Page RPM = (Estimated Earnings / Number of Page Views) * 1000
For example, page RPM of web page with an estimated earnings of $100 for 10,000 page views is $10. This is used as a reporting metric in AdSense to indicate how much a publisher will earn for 1000 page views. Page RPM is generally referred as RPM.
Ad RPM
An individual ad RPM is calculated by dividing the estimated earnings by number of ad impressions and multiplying by 1000.
Ad RPM = (Estimated Earnings / Number of Ad Impressions) * 1000
Simply calculating page RPM may not be sufficient since Google allows to place more than one ad on an AdSense publisher’s web page. In such scenarios where more than one ads are placed on a page, ad RPM can be used for individual ads as a performance metric in reporting.
For example, a page generates $100 for 10,000 ad impressions then the ad RPM is $10.
Ad Request RPM
Ad request RPM is the estimated earnings of an AdSense publisher for thousand number of ad requests.
Ad Request RPM = (Estimated Earnings / Number of Ad Requests) * 1000
Cost Per Mille
CPM stands for Cost Per Mille is the amount an advertiser will pay when 1000 impressions of his ad is being accrued on an AdSense publisher’s website. Mille in Latin is equal to 1000, it is also referred as Cost Per Thousand Impressions.
CPM is the bidding term used in AdWords where advertisers chose the amount to be paid for 1000 impressions of an ad. For an AdSense publisher, it is a revenue generated for displaying an advertiser’s ad for 1000 times when the advertiser chosen CPM model. It is a popular advertising model like CPC where advertisers pay for clicks. Google based on auction will decide to choose from CPM and CPC ads that generate more revenue for AdSense publishers.
Let us take an example of an ad on a page accrues 10,000 impressions on a day and the advertiser had chosen to pay $1 for thousand impressions in his AdWords campaign.
CPM revenue for AdSense publisher = CPM cost for AdWords advertiser = 10000/1000*1 = $10.
Effective CPM
eCPM stands for effective cost per thousand impressions and is used as a performance metric to evaluate AdSense publisher’s revenue. eCPM is calculated by multiplying CPC, CTR with thousand.
eCPM = CPC * CTR * 1000
For example, if an advertiser pays $1 for a click for a banner ad and the ad received 2000 impressions per week then eCPM is calculated as below:
| Ad Type | CPC | Visitors | Clicks | Duration |
|---|---|---|---|---|
| Banner | $1 | 2000 | 10 | 1 Week |
eCPM = $1 * (10 / 2000) * 1000 = $5
Note: Google AdSense uses RPM instead of eCPM to make the performance reporting simple.
Conclusion
It may look the CPM amount paid by the advertiser is the RPM amount received by the publisher. But in reality this can’t be the case as many other factors influence the RPM for publishers. For example, when you display an AdSense ad, Google displays the best CPC / CPM ad each time based on auction. This will result in showing different ads from different advertisers on the same ad space. Thus the RPM amount for thousand impressions is the average of multiple ads and have no direct relation with CPM from a single advertiser. Also the estimated earnings shown in the AdSense account is the amount after Google deducts the revenue sharing portion.
In summary, CPM is the direct parameter for advertisers to measure the advertising campaign. But RPM is only the reporting term to give an idea of how much a publisher can earn for thousand impressions.
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