How to Calculating eCPM?

Whether you’re an amateur website owner or a professional webmaster, chances are you’ve heard the term eCPMs more than once.

So, what is eCPM?

eCPM stands for “Effective cost per Mille” or “Effective cost per thousand”.

eCPM allows internet advertisers and publishers to measure banner ads performanceand thus determine how to best improve results, according to the specific website and a variety of other factors. eCPM is a measure that allows advertisers and publishers to know how much they are earning from every 1,000 ad or website impressions.

eCPM is the result of a calculation of the ad revenue generated by a specific banner or campaign, divided by the number of impressions of the banner or campaign in question expressed in units of a thousand.

How do you calculate eCPM?

Calculating eCPMs is a very simple process once you know the basics.

Take a look at the steps below:

1. Calculate how many impressions or views a particular ad or website has had during a specific time period. For example, let’s say your ad or website was viewed 10,000 times over the last month. This data can be gathered with the help of several traffic tracking programs, such as Google Analytics, etc.
2. Sum up the earnings generated by the ad or website during that time period. For example, let’s say the total ad revenue during the past month was $500.
3. Keeping these figures at hand, divide the total earnings by the number of impressions. Using the numbers in this example, calculation would be as follows:                                     $500 ÷ 10,000= $0.05
4. Multiply the result by 1,000. Following the example above, your eCPM would be $50 (0.05 x 10,000).

Why is it so important?

eCPM enables both publishers and advertisers to compare between results and concluding which advertiser/website/ad size or position is the most profitable per 1000 imps.

For example, let’s say you monetize your website by several platforms, each served a different amount of impressions, and thus, simply comparing earnings wouldn’t be an accurate measure. Since, if platform #1 served 100k imps and earnings are $20, and platform #2 served 20k imps and generated 10$, then overall, platform #1 generated higher earnings, however, for much higher amount of impression. The solution, of course, is to calculate the eCPM, and concluding which of the platforms paid more for 1000 imps – clearly, platform #2.

Usually, media networks and self-serve ad platforms count with sophisticated software that automatically calculates eCPMs. However, it is essential for any publisher and advertiser to know eCPMs and their calculations like the back of their hand; eCPM is the most accurate way to measure an ad or campaign’s performance, compare between solutions, and improve earnings accordingly.