Tools & Tech

RPM vs CPM & Why It Matters For Publishers

sovrnmarketing // May 22, 2015


It’s a common misconception among publishers that you can’t use multiple ad networks at once. Not only is it not true, we actually encourage it! Integrating with multiple ad networks allows you to leverage their collective scale and demand partners, driving up the competition for inventory and increasing your overall CPM and earnings. One thing to keep in mind when working with multiple ad partners is what metric they’re using for payment.
One of the most commonly used exchanges, Google AdSense, chooses to measure revenue with the metric RPM (revenue-per-mille) as opposed to the more widely used CPM (cost-per-mille). Since Google can still provide CPM it may not seem like a big deal but since these two metrics are measuring different values, it can lead to some confusion when measuring performance. Hopefully this post will help you understand the difference between the two and why CPM is used by most ad partners.
What is RPM?
RPM is the page revenue per thousand impressions and is calculated by dividing your estimated earnings by the number of pageviews you received, then multiplying by 1000.RPM isn’t the only metric that Adsense tracks but it is their primary way of measuring revenue. It is your revenue for every 1000 (mille) impressions on the page.. However, they use a selective definition of the word “impression”. RPM calculates the collective CPMs for all ad zones on a publisher’s page, while CPM refers to the cost an advertiser is willing to pay for a singular ad zone.
For example a website has 4 ad spaces and Google estimates that you will make $0.15 from 20 pageviews. This estimation has to come from Google since they work on a CPC (cost-per-click) model but we will go more into detail later. All you have to do to calculate RPM is divide the estimated earnings they give you over pageviews and then multiply that quotient by 1000. In this example you would get an RPM of $7.50 meaning for every 1000 pageviews, those 4 ad units collectively earn around $7.50.
How does RPM differ from CPM?
A publisher’s RPM will always be greater than their CPM, since RPM refers to the total revenue earned for every 1000 impressions, and the CPM refers to the cost an advertiser is willing to pay for every 1000 impressions in one ad zone, not the entire page. CPM is the price that advertisers are willing to pay for 1000 impressions in one ad zone.. Since CPM measures how much each ad zone’s impressions are worth,, it is an exact representation of how much money is going into your site as opposed to RPM, which is how much money you might be making based on an average.
Let’s go back to the publisher we used in the example above. Google said their estimated earnings would be $0.15 per 20 page views but that is combining the revenue of all 4 ad spaces in each of those views. One pageview would mean 4 impressions when calculating CPM. This turns that $0.15 into $0.0375 for every 20 impressions. When you plug this into the CPM equation you end up with a CPM of $1.875.
If this publisher only knew that RPM and CPM were measurements of revenue, then they would think AdSense is blowing every other ad partner out of the water. Along with being misleading, RPM is less representative of your advertising efforts. Google works on a CPC (cost per click) or CPA (cost per action) which means that you get paid when someone interacts with an ad as opposed to just being shown it. Advertisers pay more for when there is interaction but it is far less consistent than paying per ad impression.
How to derive CPM from RPM
We can’t force Google to change their ways so the next best thing is teaching you how to calculate RPM into CPM. Let’s convert the example’s RPM of $7.50 into a more usable CPM. To do this we need to find cost to advertisers.
Cost to advertisers = (Estimated Earnings/Ad units)
Since there are 4 ad units on this site you can calculate cost to advertisers by dividing estimated earnings by 4.
CTA = ($0.15/4) = $0.0375
CPM = ($0.0375/20) x 1000 = $1.875
Need some help?
sovrn chooses to use CPM as our definitive revenue metric when dealing with publishers. If you’d like to learn more about our programmatic offerings, or if you’d just like to get some advice on how best you can optimize your current advertising strategy, sign up for a Sovrn account and gain access to our platform. We’ll put you in touch with the right team to help you achieve your goals.

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