There are multiple metrics that advertisers and publishers track to measure the performance of their campaigns and ad inventory, and eCPM is one of them. As an ad exchange owner, you should also be aware of the eCPM calculation formula. In this guide, we will explain why this metric is important to you, clarify its meaning, discover how to calculate it, and more.
eCPM stands for effective cost per mille and should not be confused with CPM, which is simply cost per mille (or cost per thousand impressions). While CPM is also a type of buying model, eCPM is a metric indicating how much a thousand impressions earn.
Calculating eCPM is a must for publishers, as in this way, they understand how efficient and profitable the inventory is. Using this metric, they can ensure strategy and ad revenue optimization.
For marketers, CPM may seem to be a more important rate, as it measures the cost of delivering a thousand impressions. However, tracking eCPM allows them to understand the effectiveness of advertising campaigns. These insights can then be used for fine-tuning the campaigns and ads themselves.
In short, the eCPM formula is as follows: the ad revenue must be divided by the number of ad impressions and then multiplied by 1000. Now, let’s review how to calculate eCPM in detail.
First of all, it is essential to measure total ad earnings. To do this, publishers multiply how much they earn per ad by the number of ad units they sell. For instance, the price of every unit is $3, and 100 of them were sold within a day. This means that the total revenue is $300.
As for advertisers, they can use the total ad spend instead of ad revenue.
The next step is to divide the identified revenue by impressions. For example, 80k impressions were received during one day. Then, dividing $300 by 80,000 results in $0.00375.
Finally, the revenue per impression is multiplied by 1000 so publishers can figure out their revenue per thousand impressions. In our example, $0.00375 multiplied by 1000 is $3.75.
The formula is the same for publishers and advertisers; the only difference is that publishers use the ad revenue rate, while marketers use the amount of money they spent on a specific activity.
To simplify the calculation process, publishers and advertisers can use an eCPM calculator.
The eCPM value is affected by multiple factors. Here are the key ones.
Different advertising formats may have different eCPMs. For instance, video ads may cost more than standard banner ads. Therefore, they will be more expensive for advertisers but more profitable for publishers.
High-quality ads, for instance, creative and memorable videos in high resolution, tend to be more appealing and engaging. They often have higher eCPMs than generic or low-quality advertisements.
Precise targeting is key to effective advertising, so ads that are well-targeted and address specific audiences usually show better eCPM rates.
For publishers, it is also important to pay attention to the ad placement on their websites or apps, as ads that are easy to notice usually drive more income. For instance, these can be ads placed above the fold or pop-up advertisements.
Seasonality is another factor that can have an influence on eCPM. For example, during holidays or special events like Black Friday, the competition for the publishers’ ad inventory often increases, which positively affects the eCPM rate.
Publishers that target niche audiences often have higher eCPMs than those addressing general audiences. This happens because advertising to specific customers is usually more expensive than promoting something to everyone.
A website or app with a large base of loyal and engaged users usually has higher prices for ad inventory. As a result, its owner will earn more than publishers with low traffic.
Optimizing the eCPM rate is essential both for publishers and advertisers, so here are some recommendations for them to consider.
Starting using a programmatic demand- or supply-side platform is one of the most effective ways for marketers and publishers to increase the eCPM rate. Applying multiple settings, advertisers can target exactly those users who are most likely to get interested in their ads. In turn, publishers deliver relevant advertisements to their visitors or users, which is good for their experience.
It is also essential for marketers to try different ad formats, as some of them may drive better results than others. As for publishers, they should do the same, along with experimenting with ad placements. For instance, providing some ad space above the fold can lead to higher eCPMs.
Advertisers also need to apply all the available targeting settings. Yes, the ads will reach smaller audiences, but these users will be more likely to convert.
While advertisers should create high-quality ads, publishers need to ensure a good user experience. For example, it may be essential to increase the website speed or make it mobile-friendly. Besides, it is important to prioritize the quality of ads over their quantity.
Publishers also need to optimize their websites for SEO to drive quality organic traffic. More visitors mean more opportunities, which will help increase eCPM.
As an owner of an ad exchange, you need to assist publishers and advertisers in terms of optimizing their eCPMs, as this will have a positive impact on your income. With SmartHub, this is simple since this white-label ad exchange platform comes with the following features and opportunities:
With SmartHub’s ready-made solution, you can start media trading straight away and maximize your revenue with the adaptive margin feature. For instance, StreamKey managed to double its profit within only two months.
In case you need a specific feature for driving higher eCPMs that is currently missing on the platform, feel free to contact the SmartHub team to get a customized solution.
Publishers and advertisers aim for high eCPMs, so ad exchange owners should do everything possible to help them reach their goals. Obviously, you cannot optimize the publisher’s website and make it mobile-friendly, but you can offer different ad formats and other features.
Note that there is no need to build an ad exchange from scratch. You can leverage a white-label platform that will start operating within a week or a bit more. This is the way to reduce production time and costs since all the essential features are already integrated.
Try SmartHub to ensure high eCPM rates for your publishers and advertisers!
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