In the digital ad industry, there are various revenue-calculating models in use. Nevertheless, the most used are RPM and CPM models. While the RPM refers to the estimated ad revenue generated by a publisher for 1000 page views, CPM determines the revenue earned for 1000 ad impressions. To clarify, RPM is calculated on per page basis and CPM is calculated based on per ad unit. Let’s dive deep to understand the difference between RPM and CPM.
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What is RPM?
RPM is an acronym for “revenue per thousand impressions” or “revenue per mille”. Here ‘mille’ stands for 1000 impressions. Usually, the amount earned through all the ad impressions depends on the campaigns but the RPM metric calculates the revenue earned for 1000 page views. The thing to note here is that a page view may have many ad impressions.
RPM is absolute and factually an important metric used by Google AdSense to report ad revenue remunerations to a publisher. In fact, RPM is a valuable and specific metric used by publishers, to track performance in terms of revenue generation by displaying ads on the website.
RPM = (total earnings estimates/total number of page views)*1000
What is CPM?
CPM, an acronym for “cost per mille” or “cost per thousand impressions”. CPM calculates the advertising cost per thousand ad views. It does not matter whether an ad is clicked or not, an advertiser needs to pay for every ad shown on one ad zone on the website, which is called an impression. To understand this better, assume that you ran a campaign and paid a certain amount for every 1000 ad impressions. This amount is CPM for your advertising campaign. The advertisers use CPM mostly because it helps to calculate the amount spend for every ad impression directly.
However, for a publisher like you, things would be a bit complicated. For instance, if you use Google AdSense, you’ll be presented with RPM earnings (it’s an estimated earning per 1000 page views). It’s better to keep track of it and increase it. If you use any other CPM ad networks, you naturally will be paid based on impressions and hence, you are supposed to keep track of CPM.
RPM Vs CPM
|Revenue per thousand impressions||Cost per thousand impressions|
|Comes in various types:
1. Impression RPM
2. Ad RPM
3. Page RPM
4. Ad Request RPM
|This is of two types:
(eCPM metric is used to evaluate AdSense publisher’s revenue
|It calculates the revenue for publishers||It calculates the cost to an advertiser|
|RPM is widely popularized by Google AdSense (an ad network)||CPM is widely popularized by real-time bidding (an open protocol to conduct auctions).|
Deriving CPM from RPM
Though both of them are different, you can derive CPM from RPM and vice versa. Let’s assume that there are 5 ad units on a page and $0.25 is the estimated earnings from 20 page views. So, the RPM will be 0.25/20*1000= $12.5.
This means for every 1000 page views, the 5 ad units will return a revenue of $12.5.
Now let’s convert this RPM of $12.5 into CPM. Before we get into this, it is important to find the cost to advertisers ie CTA. CTA can be found by the formula:
CTA= Earnings estimated/Ad Units
Here CTA will be: $0.25/5= $0.05
Thus, CPM = (CTA/page views)* 1000 = ($0.05/20)*1000=$ 2.5.
To be frank, publishers interchangeably use these two metrics. But it is necessary to keep track of them separately and adjust your strategy accordingly. Because RPM is just an estimate provided by Google, CPM is the actual cost paid to a publisher like you. Besides, if you want to step up your monetization strategy, you’ll be using CPM, not RPM. And, no matter whether it is an RPM metric or a CPM metric, it is essential for a publisher to ensure higher ad viewability and better demand partners to increase ad revenue consistently.