For those who don’t know already, RPM and CPM are among the most essential indicators that any publisher should analyze, as they both provide critical insights into advertising revenue.
Moreover, RPM and CPM hold the power to shape and strengthen a publisher’s strategy, yet beginner publishers often need clarification.
As CPM is the key to the income an advertiser must pay for 1,000 ad displays, RPM unlocks the revenue of those 1,000 ad impressions.
As a result, in today’s article, we discuss anything a publisher must know about the longstanding mix-up between RPM vs. CPM, how to calculate them, when to use them, and, of course, tips and tricks on how to better optimize for an ad impression that drives revenue.
RPM vs. CPM: At a Glance
| Metric | Definition | Ad spend | Use | Objective | Used By | The Benefit |
|---|---|---|---|---|---|---|
| RPM | The revenue per 1,000 impressions. | RPM= 1,000 x (Total revenue / Total impressions). | It measures the revenue generated by your ad campaign. | It increases the revenue per impression, optimizing ad placement, targeting, clicks, or conversions. | Publishers | It calculates the efficiency of ad placements in generating revenue. |
| CPM | The cost per 1,000 impressions. | CPM= 1,000 x (Ad spend / Total impressions). | It measures the cost of your ad campaign. | It improves impressions while securing better ad rates on high-traffic websites. | Advertisers | It enables advertisers to manage their budgets and target specific audiences. |
What Is CPM?
Also known as Cost per Mille or Cost per Thousand, CPM is a marketing metric used by advertisers and publishers, but advertisers predominately use it and pay for 1,000 ad impressions.
Moreover, advertisers can use CPM to set a budget for their ad campaigns while estimating the cost of reaching their target audience through a specific number of ad impressions.
The publisher can use CPM to price their ad inventory based on an estimated number of impressions their website generates.
What Is RPM?
Revenue per Mile (or Revenue per Thousand) is a metric that analyzes and measures the revenue of 1,000 ad impressions on a web page, regardless of its type, such as video, display, and others.
Also, RPM is the default reporting metric of Google AdSense, a crucial metric for publishers looking to upskill their revenue stream.
Furthermore, RPM enables publishers to estimate their monthly revenue by comparing the ad performance on multiple ad exchanges, thus making informed decisions and conducting data-driven strategies.
RPM vs. CPM: How to Calculate Them
It is equally important to calculate RPM and CPM, yet there are some key aspects that you must consider.
One thing that must be clear is that RPM depends on various factors, such as the ad type, ad inventory quality, audience, demographics, and demand. However, CPM needs to be analyzed with other metrics, as it is independent of ad quality and the effectiveness of the impressions. As such, you can determine the success of an advertising campaign.
How to Calculate CPM
CPM = 1,000 x (Total Cost of Campaign / Total Number of Impressions).
How to Calculate RPM
RPM = 1,000 x (Total Revenue / Total Number of Impressions).
RPM vs. CPM: When to Use Them?
As we’ve discovered, each metric has its specifications, so publishers should know when to take advantage of them by learning when to use them at their best.
When to Use RPM
1. Evaluating Ad Placements and Formats
RPM offers insights into the highest ad revenue ad placement and format based on their direct performance.
By analyzing RPM against CTR (Click Through Rate) and conversion rates, publishers can calculate the success of their campaigns and can better optimize their ad strategy for an increased revenue stream.
2. Optimized Pricing Strategies
While RPM directly refers to the revenue generated by 1,000 ad impressions, publishers could better grasp the value and potential of their ad inventory and set its price accordingly.
As such, it caters to more lucrative partnerships.
3. Assessing Ad Networks and Platforms
Another potent scenario is comparing different ad tech platforms against a publisher’s ad inventory performance. Thus, by identifying the highest-revenue ad platforms, a publisher could analyze what works best and optimize what doesn’t perform well to ensure substantial growth.
When to Use CPM
1. Identify Valuable Advertisers
As money makes the world go round, CPM helps publishers identify and take advantage of high-paying advertisers looking for the best premium space.
2. Increased Ad Revenue
While it doesn’t directly analyze the revenue, publishers can still use CPM to set their proper ad inventory pricing while maximizing their revenue for their impressions.
3. High Performing Ad Formats
Besides being a metric for advertisers, CPM can also alleviate publishers’ tasks to identify high-performing ad formats and better use them to increase their monthly income.
4. Seamless Balance Between CPM and Other Metrics
Indeed, a low CPM is ideal, yet it is essential to consider other metrics and draw data-driven decisions on the adopted strategy.
For example, a low CPM with a high CTR is ideal, highlighting that you effectively targeted your audience and engaged consumers. However, a low CPM and a low CTR are less effective, and from here on, you must adopt different tactics to optimize the campaign better.
5. Data-Driven Business Decisions
Besides, with the help of CPM, publishers can make informed decisions about their ad campaign strategy and further optimize based on critical findings.
Top 5 Differences Between RPM vs. CPM
While CPM is the cost of running an ad campaign of a thousand impressions, RPM measures the revenue generated by those 1,000 impressions.
However, it is essential to understand that these two share some differences. Let’s get it into greater detail.
1. The Metrics’ Focus
First and foremost, the main difference is the metrics’ focus. RPM is on the publisher side, measuring revenue, compared to CPM, which is advertiser-centric, measuring thousands of impressions.
Regarding tracking, CPM tracks the ad campaign cost, while RPM tracks the revenue generated by the ad campaigns.
2. Ad Placement
When placing ads, CPM intervenes as the price is determined by the exact location of an advertisement, such as the header, footer, and others. In contrast, RPM is focused on the revenue side of an app monetization or website.
3. Ad Units
As we all know, a campaign could have more ad units, and as a result, CPM measures the cost per impression of different ads, while RPM focuses solely on measuring the revenue generated by all ads.
4. Bidding System
While CPM is used in bidding auctions on different ad networks and SSPs, such as Sevio Ad Manager, to determine the cost per impression, RPM isn’t used to set up a price within the bidding systems.
5. Pageview
CPM is the impressions-based cost on an app or website, while RPM considers page views when measuring revenue.
As a result, by understanding these fundamental differences, you will know how and when to use CPM or RPM. Both have many benefits, depending on when and where you use them and could significantly impact your ad campaign strategy.
RPM and CPM for Publishers
As both metrics can be used by publishers, even though we established that advertisers mostly use CPM, publishers can also take advantage of that power. As such, CPM can rate their available ad space, thus setting appropriate pricing, while RPM helps publishers estimate the revenue and make data-driven decisions.
But let’s dive deeper and discuss every aspect essential for publishers.
Ad Performance
When it comes to ad performance, both CPM and RPM share this side of the coin. Specifically, publishers can use CPM models’ insights regarding some of the best-performing ad formats.
Moreover, by tracking CPM, publishers could upskill their ad strategies and pricing and improve their revenue-increasing strategy.
In contrast, RPM also brings new details and is used along with other metrics, such as CTR and conversions so that publishers can calculate their marketing efforts against the revenue.
Impact on Ad Revenue
RPM and CPM can monitor and track a publisher’s ad revenue by identifying top-performing ad formats. Tracking CPM helps publishers set appropriate prices for their ad inventories.
Thus, RPM and CPM, combined with other metrics, enable publishers to optimize their ad strategy for maximum revenue.
RPM vs. CPM: Optimizing for Impressions and Ad Revenue
3 Tips to Improve CPM for Impressions
1. Header bidding could be great for publishers looking to boost their CPMs, as they can deploy their ad inventory faster. As a result, the publisher could simultaneously deliver their ad impressions to multiple demand platforms through real-time auctions.
2. Integrate premium ad units, like pre-roll, mid-roll, and post-roll video ads, interactive formats, and native ads, which typically have the highest engagement, which leads to a higher CTR.
3. Use advanced audience targeting to deliver in a noninvasive way to the right people at the perfect time, based on user behavior, demographics, and others. You can leverage data analytics tools or report insight from your chosen platform here.
3 Tips to Improve RPM for Ad Revenue
1. It is advisable to experiment with different ad layouts until you find the most rewarding one that also balances with the user experience. Also, you could test out different strategic ad placements, such as above the fold, within content, and others, to ensure that ads are visible without being intrusive.
2. Did you know that video ads have an average click-through rate (CTR) of 1.84%, the highest among all digital ad formats? Use high-engaging ad formats, such as native or video ads, to increase engagement and revenue.
3. Ensure your website has a clean UI/ UX design and is responsive on mobile to ensure your potential customers seamlessly swap their desktop with mobile and the other way around. Here, you can also implement heatmaps, see where your users are lost, and better optimize from there.
Factors That Affect Your RPM and CPM
Several factors could impact a publisher’s RPM or CPM. So, in the following chapters, we’re discussing additional factors you should consider.
1. Ad Quality
As we talked about ad placements and ad formats, it’s time to discuss further, and in this case, the ad quality. It is well known that low-ad quality or irrelevant ads result in lower revenue, meaning publishers must ensure their displayed ads are relevant to their target audience.
2. Geolocation Targeting
As there are tier 1 countries that usually tend to have a higher CPM and RPM, it is wise for advertisers to know that they may be required to pay more to target potential customers from specific regions or countries. You could look for a revenue calculator for a country breakdown per category.
3. Websites’ Niche
A rate difference could exist depending on a website or app’s topic, niche, or industry. Some industries could be more lucrative, resulting in a higher CPM or RPM.
As a result, it is wise for publishers to consider their niche and target advertisements accordingly.
4. Traffic Volume
Publishers should notice another essential aspect: their website’s traffic volume. Usually, it’s easy to figure this out, as higher traffic means higher revenue and vice versa.
5. Consumer Behavior
So, the latest studies suggest that 79% of consumers are more likely to purchase products if the brand provides a consistent experience across devices.
As a result, thoroughly analyzing a user’s flow on your website, along with CTR and bounce rates, could lead to critical discoveries that impact the RPM and CPM.
Publishers should actively work towards entertaining potential customers at each step of the marketing funnel and creating valuable content to keep users on their venue longer, thus increasing potential revenue.
6. Price Floors
For those new to the ad tech scene, it is essential to remember certain shady practices, such as bid shading, when setting the price floor. In this instance, the advertisers purchase the ad inventory at the lowest price.
So, by setting a higher price floor, the publisher could protect their ad inventory.
7. Privacy Cookies
As the internet landscape moves slowly but steadily towards a cookieless era, publishers and advertisers are on the spot to find new creative ways to integrate first-party data and other alternative sources to reach their desired audience.
In essence, web cookies have the power to track consumers’ browsing behavior, and in the end, they impact RPM and CPM.
So, in short, it is advisable for both publishers and advertisers to take note of these factors when creating an ad campaign. Relying on data-driven facts and statistics is best, but optimizing these factors could set you apart from an amateur.
Finding a good ad tech solution is challenging, and usually, it’s about trial and error until you’ve found the right solution for your business needs. Indeed, there are many AdSense alternatives on the market, yet a balance must exist between their offerings, your goals, and what it implies for the future.
One notable example could be Sevio Ad Manager, which offers publishers more flexibility when selling ad space, besides excellent ad customization. What is intriguing and beneficial for all publishers is that Sevio Ad Manager provides a detailed overview of their ad inventory, websites, and apps, offering key insights into their status, number of active ad zones, and others.
This granular control puts publishers in the power of their earnings, enabling them to manage their advertisers without intermediaries and taking the pressure to sell off.
Additionally, you could allow Sevio’s sales representative to manage your day-to-day sales activity while you remain in complete control.
RPM vs. CPM: What Publishers Should Choose?
Indeed, CPM and RPM are the most critical metrics for publishers; they have different scopes, as one indicates the ad relevancy and engagement, and the other measures the revenue generated by every 1,000 ad impressions.
However, as these metrics solely don’t have any specific indication of your ad’s performance, it is wise for publishers to consider both of them, along with others, such as CTR, bounce rates, and others.
FAQs
Why is My RPM Higher Than My CPM?
It is usual for the RPM to be higher than the CPM, as when it is calculated, other metrics are implicated, such as the cost of 1,000 impressions, CTR, and revenue share received from the ad tech platform.
Is CPM Better Than RPM?
There isn’t such thing as one being better than the other, as CPM and RPM serve different purposes. One calculated the cost per thousand, and the other calculated the revenue per mile.
Instead, it is wise for publishers to consider both when creating their strategy.
How Do You Calculate RPM From CPM?
You cannot calculate RPM from CPM, yet to calculate it, you need to divide the total revenue by the total number of impressions and multiply it by one thousand.
What Is the Difference Between RPM and CPM?
There are many differences between RPM and CPM, yet the most common ones are the metrics’ focus, ad placement, ad units, bidding system, and page views.
Final Thoughts
As we’ve reached the end, and while understanding RPM vs. CPM, publishers need to focus on increasing their RPM while ensuring a good CPM, which translates to better ad quality and user experience.
Moreover, if you have any questions regarding how to maximize your ad sales, be sure to contact us, as our Supply Side Platform helps businesses sell their ad space with ease, and from a dedicated white-label selling page.
Are you ready to turn your ads into high revenue?
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