In Advertising, Blog Articles

Mobile Advertising: What Is eCPM?

Or, “Nobody Told Me There Would Be a Math Quiz!”

eCPM-BlogLike so many acronyms flying around the business world today, eCPM means different things to different people. It is frequently confused with similar terms in the publishing, media-buying and advertising network worlds. Here are a few acronyms in the same family of ideas:

CPC = Cost per click

Under a CPC model, the advertiser pays for each valid click-through, usually associated with a specific call to action, or CTA.

CPA = Cost per action

(also called PPA, or pay per action; also cost per conversion)

In cost-per-action advertising, advertisers only pay when a transaction takes place as a direct result of the ad placement.

CTR = Click-through rate

This metric measures the relative efficiency of an ad by showing the percentage of clicks per impression.

CPM = Cost per mille

(also called RPM, or revenue per mille)

Cost per mille, or cost per thousand, refers to the price a network charges for one thousand ad impressions. Impressions are just opportunities for people to see the ad, with or without any type of action or conversion taking place. The advertiser is essentially paying for eyeballs on the ad.

What Is the Difference between CPM and eCPM?

CPM can be a bit misleading since there are often exceptions that make the actual cost per thousand impressions different from the set price for one thousand views. For example, a niche company may get fewer than one thousand impressions but still have to pay in increments of a thousand. Or a very large brand might end up paying for one million impressions but actually get 1.3 million views without paying extra.

eCPM, which stands for “effective cost per mille,” accounts for such discrepancies so that advertisers can know what their real return on their advertising investment is and make more informed decisions about future ad buys. Think of CPM as the price on an invoice, while eCPM is a comparative metric.

Here’s where the math quiz comes in. Don’t worry, though; it’s not hard. To calculate eCPM, simply divide the total earnings from a particular campaign by the total impressions and multiply the result by one thousand.

eCPM-Calc-Blog

Here is an example that illustrates the difference between CPM and eCPM:

  • Gizmo Galaxy buys one million impressions for $3,000.00 on Network A. The company’s CPM is $3.00. Simple and straightforward. Also, not very helpful.
  • It turns out that Network A was fine-tuning the campaign at the beginning and delivered an extra 200,000 impressions (a.k.a. bonus impressions). So Gizmo Galaxy actually got 1.2 million views for its $3,000.00 media buy. Using the eCPM formula, Gizmo Galaxy’s Director of Marketing can see that the real cost was $2.50 per thousand impressions. This is a more meaningful number upon which to base future ad purchasing decisions than CPM would be.
  • As a test, Gizmo Galaxy ran a separate campaign on Network B under the same criteria: one million impressions at a $3.00 CPM. At the end of the campaign, the network had delivered exactly one million impressions. Since there were not any bonus impressions, the eCPM was $3.00.

When we at Phunware refer to eCPM, this is what we mean. It’s one of the tools we use to evaluate mobile ad networks, including our own. It’s a good starting point for comparing and contrasting the effectiveness of a campaign. Used in conjunction with other metrics, research and statistics, eCPM can help advertisers make informed decisions and get the best bang for their advertising buck.

Emily Reynolds
Emily is the Director of Content Marketing at Phunware, a weird cat person and a glutton for Mexican food. Follow her on Twitter at @EmJReynolds.
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