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What is eCPM? How to Calculate It?

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Team Storyly
May 22, 2023
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What is eCPM?

eCPM (Effective Cost Per Mille) is a metric used in digital advertising to measure the performance of ad inventory. It represents the revenue earned for every 1,000 ad impressions displayed, regardless of the type of ad unit used (such as banners, videos, or native ads). 

It specifically measures the revenue that ads generate on a website, which can help gauge the ads' cost-effectiveness and ROI. It's somewhat similar in concept to CPM, but there are some key differences between them that you should understand.

The following breakdown of eCPM or effective cost per mille and what it involves will give you a better idea of what this metric is and why it's important in many ad campaigns.

So, what does eCPM mean? The basic eCPM definition describes this metric as effective cost per mille, a publisher-side metric that indicates the revenue that an ad has generated per 1,000 impressions or mille. You may also refer to this metric as "cost per thousand impressions."

As this metric increases, so does the amount of revenue that an ad generates for publishers per thousand impressions, which are the times when an ad appears on a user's screen. Even if the user doesn't see the ad, this counts as an impression. If an ad has a high eCPM, it generally attracts more engagement compared to ads with lower eCPMs, leading to increased revenue.

Effective cost per mille is similar to revenue per mille (RPM), which publishers used to use in lieu of eCPM, which advertisers tended to use. However, more publishers today measure eCPM to connect with the advertisers they work with when publishing ads. 

What is the difference between CPM and eCPM?

The main difference between CPM and eCPM is while cost per mille (CPM) measures the basic cost of advertising per thousand impressions, eCPM measures the revenue that ads generate per thousand impressions. The former functions as more of a payment model, while the latter serves as an indicator of an ad's profitability.

Why is eCPM important?

eCPM helps publishers determine whether ads that they publish are effective. If the ad has a high eCPM, the ads are converting viewers. Publishers can then use this information to optimize their payment model and make the most of their budgets.

Meanwhile, advertisers also benefit from eCPM, as they can determine whether their campaigns are effective based on this metric. Ad networks favor ads with high eCPMs, which means that advertisers running these ads could more efficiently generate a larger number of impressions. Ads with high eCPMs bring more value than those with lower eCPMs.

You can use eCPM to measure the overall effectiveness of ads, as the "effective" element of the acronym suggests. You can set a specific goal for your ads and measure this metric to gauge what kind of results your ads are getting. This metric can be used to figure out what kind of earnings you can anticipate in the future.

How do you calculate effective cost per mile (eCPM)?

You can calculate eCPM using the basic eCPM formula or an eCPM calculator. The formula involves dividing ad revenue by the total number of ad impressions, followed by multiplying this number by 1,000.

However, the majority of ad platforms, such as Google Ad Manager, instantly calculate this metric for you. 

The visual displays the formula for "eCPM". The calculation is as follows: "(Total Ad Revenue / Total Measured Impressions) x 100". There is a Storyly Glossary logo at the bottom right.
Calculation of eCPM

What is a good eCPM?

A good ad eCPM will differ from ad to ad or campaign to campaign. When determining what a good eCPM, you must consider the following factors:

  • Location — Depending on your geographical location and market, the eCPM could be higher, particularly in countries like the U.S. and in the U.K.
  • Site Speed — A website's loading speed will also influence the engagement rates for ads.
  • Ad Placement — If ads appear higher on a webpage in above-the-fold content, they'll generate more revenue and tend to have more impressions.
  • Advertising Channel — Native sponsorships and ads will see higher eCPM than display ads.
  • Seasonality — Depending on the industry, ads may see different levels of engagement at different times of the year, including specific holidays.
  • User Engagement — The website may also influence ad engagement, as websites with high engagement rates will lead to more repeat visitors, contributing to higher eCPMs

These and other factors can greatly influence this metric and what you might consider a good eCPM.

What is the average eCPM?

eCPM can vary greatly depending on certain factors. For instance, the average eCPM might be based on the location of the ad audience and the specific type of audience. Generally, the average eCPM tends to fall around $2 to $10

What is eCPM floor?

The eCPM floor is essentially the eCPM minimum. It's the lowest Effective Cost Per Mille that publishers will allow for an ad before publishing it on their app or website. It's worth noting that eCPM floors only apply to traditional waterfalls and not in-app bidding. In-app bidding entails publishing ads for the highest bidder, while traditional waterfalls allow for the manual setting of eCPM floors for each line item.

Why do I have a low eCPM?

There are many potential reasons for a low eCPM and revenue. A couple of these could include low-quality ad networks that don't get the kinds of impressions you need or slow websites that don't generate engagement and, subsequently, impressions. You can use certain helpful tools to determine why your eCPM is low and optimize your ads or campaigns accordingly.

How you can increase eCPM?

You might wonder how to increase eCPM if you find that it's too low. You can take various steps to improve your eCPM, such as:

  • Improving monthly traffic
  • Using reliable software to land the best ad networks and ad placement
  • Decide on the ad format that engages users the most
  • Use different ad networks to boost fill rates
  • Test various types of ads to gauge performance, including banner and video ads
  • Optimize your viewability score, which will make your ads more visible to users

How to use eCPM in marketing strategies

Specifically, you can use eCPM to analyze revenue and optimize ad performance.

Ultimately, eCPM makes it easier for advertisers to identify top-performing ad formats, units, ad networks, and units. Based on eCPM and the value of ads, you can then make any necessary changes to your marketing strategies, whether you need to select different ad networks or make changes to the ads themselves. Over time, this will enable you to optimize your marketing campaigns.

Understand eCPM to get the results you want with ads

Knowing what eCPM or Effective Cost Per Mille is and how it works can help you as an advertiser or publisher. This metric will reveal the profitability of ads on any ad network, helping you optimize based on the ad's performance.

To find out how Storyly's app and web Stories can supplement ads in a holistic digital marketing strategy, discover our platform's capabilities today.

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Team Storyly

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