CPM, eCPM, CPC—ah, too many similar-sounding acronyms! The digital advertising space is known for them, and many digital advertisers are confused by them. It might not be evident to everyone, but there’s a good reason for these acronyms, and it’s performance metrics!
Digital advertisers use a variety of performance metrics to evaluate the success of their digital advertising campaigns. You might know what CPM means, but what is an eCPM, and how is it different?
Here, bookmark this glossary for easy reference.
What does eCPM mean?
Simply put, eCPM stands for effective cost per mille (i.e., thousand impressions) and is calculated regardless of what buying method is used for the campaign.
The e in eCPM stands for effective, which is another way of saying calculated.
You’re probably wondering how this could be useful.
Well, while the CPM buying model is standard across the industry, it doesn’t mean all your digital advertising platforms and strategies will fit into that model. The variety of buying models in the digital advertising ecosystem can make it challenging to compare ads, channels, and campaigns. The primary reason to use eCPM is that you can incorporate other buying models into the performance metric. This allows you to translate impressions based on clicks (CPC) or actions (CPA) into one value.
How is eCPM calculated?
eCPM is calculated similarly to how CPM is calculated. It’s the total cost of the campaign divided by the number of impressions generated divided by 1,000, which gives you the total cost per a thousand impressions. The real benefit of eCPM is when you are comparing the value across different buying models, like CPC and CPA.
Translating CPC to eCPM
If you’re reviewing your paid search campaigns on AdWords, you’ll be evaluating performance based on a CPC buying model. For example, if your campaign delivered 2 million impressions and generated 5,000 clicks, your CPC would be $.50.
To translate your CPC to eCPM:
- Your campaign spend if you had 5,000 clicks at $.50 would be $2,500
- As a result, your eCPM is $2,500 divided by 2 million impressions/1,000, which comes out to a $1.25 eCPM
If you’re reviewing your paid sponsorships, you might be evaluating performance based on a CPA buying model.
- If your campaign delivered 2 million impressions and generated 100 acquisitions
- Your CPA would be $30
To translate your CPA to eCPM:
- Your campaign spend if you had 100 acquisitions at $30 would be $3,000
- As a result, your eCPM is $3,000 divided by 2 million impressions/1,000, which comes out to a $1.50 eCPM
How is eCPM different than CPM?
You might be wondering if eCPM is any different from CPM, and they’re really just different sides of the same coin. eCPM is the same as CPM, but it allows for a standardized metric across multiple buying models, campaigns, and channels. The main difference between eCPM and CPM lies in the data you’re using to calculate it. The term “CPM” only applies when you’re calculating cost-per-thousand-impressions in a CPM buying model. Whereas eCPM is a more revenue-centric and is used for any buying method such as cost-per-acquisition, cost-per-click, etc.
Sometimes, eCPM can be used by publishers or apps to track revenue per thousand impressions. But most of the time, it relates to the practical price across different buying methods.
Fun Fact: Cost-per-impression was how television and magazine advertising were originally priced. In the early days of print advertising, one major magazine used to count eight impressions per magazine copy. This took into account all the people who browsed through it in the grocery store or flipped through it at the doctor’s office or shared it with friends.
Why is eCPM useful?
This is where the smart marketer differs from the rest. eCPM can help evaluate the performance of each channel while not jeopardizing reach. The better the marketer, the lower your eCPM can be without sacrificing overall performance. Understanding how these metrics are calculated can help you ensure that you are buying effectively with the best buying model. You should look at balancing your different objectives, reaches, and outcomes in order to determine the best possible eCPM.
Marketers should look to what levers they can adjust to help balance their eCPM metrics across all their digital advertising campaigns. This approach will help marketers set clear business objectives, enable effective campaigns, and measure success to find the most cost-efficient paid channels.
What is a good eCPM?
That depends. It varies across channels, audience, industry, and a lot of other factors. Some of those factors include:
- The type of creative asset: Video assets will be more expensive than a standard display ad.
- The reach of your target audience: If your target audience is very niche, it can cost more than targeting a broad audience.
- Channel: The advertising channel like search vs. display vs. social vs. sponsorship vs. others.
- Competition: The amount of competition you have for the same target audience will impact the price you’ll pay for those users.
Given your digital advertising strategy can sometimes vastly different than another. It should go without saying, you are the best person to judge a “good eCPM” based on your campaign objectives and targeting strategies. Should you look for the lowest CPM? Not always the best idea. You should think about what you’re trying to accomplish with your digital advertising strategy.
To help you evaluate CPM (and eCPM prices) for your digital advertising campaigns, we have our CPM cheat sheet which is intended to provide a general guideline for planning and evaluating CPM. Our Client Experience team is available to help you tailor these guidelines to your campaign’s unique targeting. If you need help, just send us a note.
| TARGETING TACTIC | DISPLAY/MOBILE | VIDEO | NATIVE |
|---|---|---|---|
| Contextual | $1–4 CPM | $11–$15 CPM | $4–$9 CPM |
| Broad Data Targeting (large potential reach) | $2–4 CPM | $13–$15 CPM | $4–$9 CPM |
| Niche Data Targeting (small potential reach) | $3-6 CPM | $14–$17 CPM | $6–$10 CPM |
| Retargeting | $3-6 CPM | $14–$17 CPM | $6–$10 CPM |
| Contextual Keyword | $3-6 CPM | $12–$16 CPM | $5–$9 CPM |
Now that we’ve answered what an eCPM is, learn how to decode acronyms RTB and CPA.
