Jan 27th 2021

What Is eCPM? How To Calculate Effective Cost Per Mille

With eCPM, mobile publishers can effectively track and optimize the value of their advertising inventory.

Mobile publishers use a variety of key performance indicators to measure the success of their app monetization efforts. Of these KPIs, eCPM can be among the best-suited for analyzing the effectiveness of ad inventory. This article will define eCPM and explore some best practices that help publishers earn revenue for their apps.

Jump to a section…

What is eCPM?
How do you calculate eCPM?
Why is eCPM important to mobile publishers?
How can publishers increase their eCPM?
Choose the right mobile ad placements
Choose the right advertising partner
Consider programmatic mediation
Enhance the value of your ad inventory

What is eCPM?

In order to understand effective cost per mille (eCPM) it’s useful to consider the same metric from the advertiser’s perspective. Cost per mille (CPM) measures the cost for advertisers of serving 1,000 ad impressions. The problem with applying the same measurement to publishers is that, depending on the ad format and deal terms, some ad networks do not pay publishers by impression but rather use more in-depth performance metrics. Since the value of a single impression varies depending on the payment model, CPM cannot always accurately or effectively represent it.

Effective cost per mille resolves this dilemma by measuring the effectiveness of ad inventory, regardless of format. Publishers use eCPM to optimize ad placements, monitor monetization campaigns, and measure overall ad monetization performance.

How do you calculate eCPM?

Publishers can calculate eCPM using a simple formula: divide the ad revenue earned by the number of ad impressions served, and multiply the result by 1,000. This formula can determine the eCPM of specific ad placements or all inventory related to an app.

eCPM = (ad revenue earnings / total Impressions) x 1,000

How do you calculate eCPM diagram Vungle blog v2

Did You Know?: While some other mobile ad networks only pay developers when users click on the ads they serve, Vungle offers publishers ad revenue based on a flat CPM rate. This aims to get publishers paid top dollar for their ad impressions, no matter what.

Want to learn more? Get in touch with us today!

Why is eCPM important to mobile publishers?

eCPM is immensely useful for publishers as a single metric that unifies the tracking of ad inventory effectiveness across any format or conversion metric. If your app supports full-screen interstitial and MREC placements, eCPM can tell you which ad unit is the higher performer and earning more revenue. Publishers use these insights to enhance their monetization strategies’ performance by optimizing placements and making other improvements to the app itself.

Along with measuring ad placement effectiveness, eCPM can be a reliable metric for calculating the value of future impressions. For programmatic buying techniques like app bidding, eCPM often determines the starting value of a bid. Many ad waterfalls even feature a pricing floor that advertisers must be willing to pay in CPM before the ad deploys. Still, waterfalls are less common in an increasingly programmatic ecosystem.

Advertisers also use eCPM to measure user acquisition campaigns because it signifies the effective value of an impression. In these cases, advertisers calculate eCPM from app installations instead of revenue.

How can publishers increase their eCPM?

Increasing your eCPM has a corresponding impact on the revenue your app generates. The strategies to do so will vary, but the goal is to convince advertisers to dedicate more ad spend to each impression and conversion. Here are some techniques publishers can use to drive growth:

Choose the right mobile ad placements

Beyond whitelisting and blacklisting, publishers cannot always guarantee what types of ads will appear in their apps, but they can implement placements that perform well with specific formats. MREC placements, for example, support static images, interactive rich media, and even mobile video formats. Rewarded ads, by comparison, can be implemented in any number of ways across the user experience, each with their own unique revenue-driving potential.

Once you know what formats your users are receptive to, optimize your placements to accommodate them. Be sure to conduct A/B tests to make adjustments and focus your efforts on the highest-performing placements.

A/B test ad placements Vungle blog

Choose the right advertising partner

Publishers can make direct ad deals or use programmatic bidding platforms, but in all cases, they need the right advertising partner to make headway. Ad networks, exchanges, and demand-side platforms all bring publishers and advertisers together, but they all sell inventory differently. At Vungle, for example, our goal is to help publishers optimize their placements and pair them with the highest-quality ad creative to drive the greatest impact. Other partners may offer the following services:

  • Traditional ad networks sell inventory to advertisers at a range of prices. Many use waterfall or hybrid monetization models.
  • Ad exchanges are marketplaces where publishers and advertisers can sell to each other directly without an intermediary.
  • Demand-side platforms let advertisers manage and optimize inventory from multiple programmatic sources.

 

Supply-side platforms (SSPs) connect publishers with a range of networks, exchanges, and demand-side platforms. These services tend to increase the number of programmatic bidders or pairs publishers with the most valuable ad impressions—both of which can drive higher eCPMs.

Consider programmatic mediation

Not all mediation solutions are identical, and publishers should review them carefully before making a final decision. In 2020, most platforms offer waterfall mediation, programmatic mediation, or a hybrid model combining the two.

Waterfall mediation relies heavily on historical eCPM data to determine its rankings. If you don’t already have a high eCPM, it’s that much harder to gain priority for high-value impressions. On the other hand, programmatic mediation uses real-time bidding to give advertisers a direct opportunity to gain their preferred inventory, which tends to increase eCPM.

Enhance the value of your ad inventory

Whether you’re looking to monetize your app with banner ads or rewarded video, Vungle can help. Our complete monetization and in-app advertising solutions focus on quality creative and consistent fill rates to maximize your return on investment. What’s more, Vungle typically offers ad revenue based on a flat CPM rate so that you drive revenue for impressions and clicks alike. Get in touch with our team to enhance the value of your inventory.

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