Difference between CPM and RPM in digital advertising
June 19, 2015 | Performance

CPM vs RPMWhat’s RPM?

Revenue per 1000 impressions (RPM) represents the estimated earnings you’d accrue for every 1000 impressions you receive. RPM doesn’t represent how much you have actually earned; rather, it’s calculated by dividing your estimated earnings by the number of page views, impressions, or queries you received, then multiplying by 1000.

 

Formula:

RPM = (Estimated earnings / Number of page views) * 1000

 

For example:
– If you earned an estimated $0.15 from 20 page views, then your page RPM would equal ($0.15 / 20) * 1000, or $7.50
– If you earned an estimated $180 from 45,000 ad impressions, your ad RPM would equal ($180 / 45,000) * 1000, or $4.00

 

RPM is a commonly used number in advertising programs, and you may find it helpful for comparing revenue across different channels.

For instance, a website has four ad placements and Google estimates that you’ll make $0.15 from 20 pageviews. All you have to do to calculate RPM is divide the estimated earnings they offer you over pageviews and then multiply that quotient by 1000. On this instance you’d get an RPM of $7.50 that means for each 1000 pageviews, those four 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.

 

Formula:

CPM = (Cost to Advertisers / Impressions) * 1000

 

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

 

What rate PixFuture is using?

Our campaigns for Display Banner Ads are combination of CPC and CPM basis where we report to publisher Impressions, Revenue, and total CPM. Advertisers are able to choose to run campaigns either on CPM or CPC basis. Publishers may set their CPM floor rules on PixFuture platform to meet minimum CPM rate, any impressions that are not sold over specified CPM floor will be passed back to default ad tags publisher installed in profile from another network (e.g. Adsense).

 

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