eCPM: Acronym definition, CPM vs. eCPM, Why it's important

eCPM is a metric used in digital advertising, typically within the world of monetizing mobile apps. eCPM is used to measure how much an advertiser pays an app publisher for an ad space per unit of 1,000 ad impressions. What's the word millie you ask? Millie is Latin for thousand!

ECPM Floor

The ECPM Floor refers to the minimum cost per thousand impressions (CPM) set by a publisher for advertising on their website. If an advertiser's bid falls below this floor, their ads won't be displayed. The winning bidder is usually the one who offers $0.01 more per thousand impressions (eCPM) than the floor price. However, if no bids meet the publisher's baseline, they may incur a financial loss.

Minimum eCPM floors can be set at different levels, including by country, platform, advertiser, and ad unit. It's important for the advertising operations team to regularly monitor the impact of these floor prices on revenue, as improper settings may result in losses.

eCPM For Ads

eCPM (effective cost per thousand impressions) is a valuable metric for app developers, as it allows them to compare ad revenue across various factors such as ad network, operating system, location, and more. For example, if you want to determine which ad unit is the most profitable, you can calculate the eCPM of each and compare the results.

Suppose you find that a rewarded video generated $5.00 in revenue after 400 impressions, while banner ads generated $3.00 after 700 impressions in the same time frame. Based solely on these metrics, it is difficult to make an informed conclusion about the relative performance of the two ad units.

However, when you calculate the eCPM, you see that the eCPM for banner ads is $4.29, while the eCPM for rewarded video is $12.50. This makes it clear that rewarded video is a more profitable business model for your company.

CPM vs eCPM? What's the Difference?

You may have heard of CPM, or cost per mille, which is a metric to measure the cost of an ad campaign and is also calculated per 1,000 impressions. CPM is simply a metric that measures cost whereas eCPM measures the overall effectiveness of a campaign. Let's break down the differences for app publishers and for advertisers below.

For publishers: Again, eCPM for publishers is all about measuring whether the ads being served on your mobile app are effective. A high eCPM means that ads on your app are driving conversion events (mostly sign-ups & purchases) for the advertiser paying you, the publisher.
For advertisers: For advertisers, the people paying app publishers to place ads on their app, eCPM is useful to understand the total ad revenue generated by an individual ad campaign. Ad networks (think Facebook, LinkedIn, Google, etc.) prioritize eCPMs with high revenue. This is because often time the Ad networks only get paid by advertisers based on conversion events. So if a campaign has a high eCPM aka a highly effective campaign, they will promote those ad placements more often than campaigns with low eCPM.

Why is eCPM (Effective Cost Per Mille) Important?

For app publishers, eCPM is tied to revenue. Essentially, the higher the eCPM, the more profits the app publisher earns. eCPMs can also be used by app publishers to help predict and forecast future earnings.

How do You Calculate eCPM?

5 Ways to Increase eCPM in 2023

You might be thinking, "great, now I understand what eCPM is and how to calculate it but what can I do to improve my eCPM?". The truth is that there is no one single silver bullet to increase eCPM, it's more of an art than a science. Here are a few tips and ideas if you're an app publisher looking to improve your eCPM:

Testing different types of ads → does your application just support banner ads? Maybe it's worth exploring video ads?
Double down on whatever ad formats are performing the best → maybe you run banner ads, video ads, and have pop-up style ads but have you ever taken a look at which ad format is performing the best? Often times one format over performs the others, try doubling down on your strongest performing ad formats!
Use multiple ad network platforms → Not all ad networks are perfectly alike, if you're only advertising with Google, maybe try exploring Facebooks platform.
Improve your app's monthly traffic → If you don't have enough traffic to your app, it's going to be hard to rack up 1,000+ ad impressions. Explore ways to grow your monthly traffic.
Increase your app viewability score → Have you heard about viewability scores? This is essentially how visible ads are within your app. If you're not monitoring app viewability score, I'd highly suggest you do. It's as simple as installing a new SDK. Learn more about tracking viewability scores here.

FAQ

How Is eCPM Calculated?

You can use the following formula to calculate your eCPM:

eCPM = (Total Revenue / Total Impressions) * 1000

What Is A Good eCPM?

A "good" eCPM varies depending on several factors, such as ad placement, user engagement, website speed, target audience, advertising format, and more. In general, a higher eCPM indicates that more income is being generated per 1000 impressions, which is considered a positive result.

To determine a decent eCPM rate for your website, consider comparing eCPMs across different channels, placements, and formats. Analyzing year-over-year and month-to-month statistics, as well as trends over the past few months, can also provide valuable insight.

You can also utilize this data to set quantifiable and attainable targets for your monetization strategy.

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eCPM

Acronym definition, CPM vs. eCPM, Why it's important

Table of Contents

What is eCPM (Effective Cost Per Mille)?