If you work with online ads you are most likely familiar with both the term CPM and the term RPM. They are both important metrics when it comes to determining advertising effectiveness and performance.
We have noticed that publishers’ focus tends to lie on CPM rather than RPM, although RPM is the metric you should be focusing on if you are a publisher and your goal is to maximize your website’s session length and performance. In this post, we will break down the difference between RPM and CPM, explain why you should pay more attention to the three different RPM metrics available, and give you hand-on tips on how to improve your RPM metrics.
Definition of CPM and RPM
CPM stands for “cost per mille”, meaning the cost per thousand impressions. The formula for calculating ad CPM is:
Example: If your advertising budget for a campaign is $50 and the ad gets 10,000 impressions you calculate 50/10,000*1000= CPM $5. This indicates that the cost per thousand impressions costs $5 for the advertiser.
RPM stands for “revenue per mille”, meaning revenue per thousand impressions. The formula for calculating ad RPM is:
Example: If you estimate an earn of $100 from 50,000 impressions you calculate 100/50,000*1000 = RPM $2. This indicates that for every thousand impressions being served on a publisher’s website they earn $2.
Why you should focus on RPM
Both CPM and RPM are common terms in the advertising world, but a general distinction is that CPM is used by advertisers and RPM by publishers. CPM equals the cost and amount an advertiser is willing to pay for a thousand impressions. We have noticed that the term is often used by publishers to determine the success of an ad or ad campaign, while in theory, CPM is a metric advertisers should focus on. CPM can be high, but that does not help you as a publisher if your fill-rate for instance is very low. RPM again is the metric for publishers to pay attention to as it shows the real situation going on on your site. RPM measures the amount a publisher could potentially earn from an ad or ad campaign. There are further two types of RPM to measure, Page RPM and Session RPM.
Page RPM is a great metric for publishers to use if they want to monitor the performance of their ads on a page level. This can give a good overview of which pages are performing well and which pages could be improved. Page RPM has a similar calculation as regular RPM, but instead of impressions, you measure page views.
Example: If you estimate that your revenue for a specific page will be $80 per 20,000 page views you calculate 80/20,000 x 1000 = page RPM $4. This means that for every thousand page views the site receives, the publisher will earn $4 in return.
Session RPM is a great measure to use if you want to monitor your site’s overall performance. You gain insight into what your site’s earnings are per website visitor, and can therefore easily determine the value of your site.
Example: If your ad sessions landed on a number of 40,000 and this generated an estimated revenue of $120 you calculate 120/40,000 x 1000 = Session RPM $3. This means that for every thousand site sessions you earn $3.
Summary of RPM metrics
General RPM gives a good basic evaluation of how much your site is making based on impressions. Page RPM is a great metric for publishers to use when they want to evaluate their overall site performance, and see which pages need improvement, and analyze why certain pages perform better than others. Session RPM is by far the best metric to use if you want to know how much you are earning per site visit or website session and gives you a great indication of what your site is worth.
How to improve RPM?
Now that you know how to calculate three different types of RPM values, you may wonder what you can do to improve your RPM. As you understand, these tactics help to improve your overall performance, and therefore also indirectly affect your RMP. Worthwhile to mention before we move forward is that CTR, click-through rate, and CPC, cost per click will affect RPM. An increased CTR also equals increased page revenue which affects RPM directly. CPC tells you how much someone is willing to pay for an ad on your site, and the higher your CPC is, the higher will your RPM be. Have a look at our mini-series on how to make more money on your website where we dig deeper into supply quality, user acquisition, and session length if you want to learn more about improving website performance. Let’s jump on to how you can improve your RPM.
Optimize your ad units
This might sound obvious but there is so much you can do by just testing and updating your ad inventory. Try different media formats, like video and native ads, that tend to have a higher CTR which as you know affects RPM positively. If you don’t want to experiment with different media formats, you can try differently sized units and see what works best for you. There are some IAB standardized sizes that advertisers tend to prefer, so by choosing these you have a chance to increase your CPC. Also, wide ads and interstitials have a high CTR, but bear in mind that it’s 2020, and ads should never be disturbing, as this will have a negative impact on your performance.
Play with ad refresh
If you haven’t implemented ad refresh already, do it NOW. Ad refresh allows you to serve multiple ads within the same placement on your site, meaning you can double or triple the income of one unit just by having ad refresh installed. Ad refresh either refreshes based on time or based on when a wished action on the site is executed. While it might be tempting to go crazy on the ad refresh, don’t overdo it, as this again will have a negative impact on CPM and the performance and site experience. Try your way to the optimal ad refresh.
Fix your site speed
This can’t be stressed enough, if you have a slow site, your website visitors will not stick around. Site speed and ad load have a crucial impact on your site’s performance as it affects ad viewability, session length, and user experience. Check out this full post on site speed for more information on why it’s so important to have a fast website and hands-on tips on how to ramp up your page speed.
Quality before quantity
This applies to both content and website traffic. Having great, relevant content for a targeted audience will generate traffic. Organic traffic is always best, as these visitors come to your site because it’s relevant to their interests. Remember that large amounts of traffic do not automatically mean better website performance. If your traffic comes from irrelevant locations or worst-case scenario, is generated by bots, having large amounts of traffic will not increase your revenue, quite the opposite. It can make your site slow which you know is harmful to performance and having poor quality visitors can lower your fill-rate and even decrease your site’s quality score, not anything you want to play around with. Focus on producing quality content that attracts quality traffic that engages with your site. That will improve your page RPM.
This is sort of an extension to the previous tip, but remember to stay relevant to your audience. Don’t sell your inventory to Asia if you don’t have any readers in Asia. The content and targeting will not be relevant, nobody will buy your inventory and your revenue will suffer. Stick to your niche and if needed you can target different sections of your site to different locations and buyers.
Hopefully, we have persuaded you to start paying attention to RPM instead of focusing all your attention on CPM, it will not help you get better results as CPM does not tell the whole truth about your ad performance. Invest your time into looking at the three RPM metrics introduced instead, they all indicate how your website’s performance is doing, far better than CPM does. By following the steps provided to improve your overall website performance you can also ramp up RPM values and earn more money off your site.
If you want to take your website revenue to the next level, our marketplace team with a decade of experience are happy to assist you in maximizing your website revenue. Contact us by dropping a line on the e-mail below.