One of the first terms that you hear when you’re breaking into programmatic advertising word is RPM. The term is an abbreviation for “rate per mille,” where “mille” stands for 1,000. This is a common method used by online advertising platforms such as AdSense, for example, to determine the pay rate for 1,000 ad impressions on a website.
This is the far definition, but if you are wondering what is RPM good for and how it is different from other metrics such as CPM, this guide will help you get comfortable with the terms used in the programmatic advertising world.
Why is RPM important?
RPM is a crucial metric for publishers who run ads on their websites, particularly if ad monetization is a large portion of company revenue. The goal of most publishers is to continually improve their RPMs, which results in increasing their ad revenue.
RPM is calculated by dividing your estimated earnings by the number of impressions or page views, and the result is then multiplied by 1000. This is not a metric that represents how much you have actually earned, but it allows you to see how much you earn per 1000 page views.
For example, a website that gets 40,000 page views a day and generates $600 in daily ad revenue has an RPM of $15.
$3,600 revenue / 4,000 pageviews x 1,000 = $15.00 page RPM
What are the different types of RPM?
The three main types of RPM:
- Page RPM: The example above is based on page views, which means that it uses page RPM. Page RPM is an abbreviation of revenue per mille, or revenue per thousand, and is a digital advertisement metric used by publishers that estimates the revenue a site can generate for every thousand page views.
- Impression RPM: Impression RPM measures revenue per 1,000 impressions of an ad unit.
- Session RPM: Session RPM is the amount of revenue per thousand users. It is also known as, RPM V (revenue per mille visits) or RPM U (revenue per mille users). Specifically, the amount of revenue earned by a website via display ads for every one thousand users. As a user consumes more of your website content, the more ads they see, and the more the value of the individual session for that user increases for the publisher.
RPMs are similar to CPMs, which define the cost advertisers pay for 1,000 ad impressions. Instead of measuring the cost per ad, RPMs measure the revenue per 1,000 ad impressions.
In some situations, RPM and CPM are two terms that are used interchangeably. Some advertising platforms use the abbreviation “eCPM” instead of RPM to refer to “effective CPM,” which practically means the same thing.
Different platforms use different metrics for their reports, but it’s important to understand that RPMs aggregate all different ads served during a session on a particular web page.
Why use RPM as a metric?
Using RPMs as a metric to keep track of your earnings from advertising can provide publishers with a goal to aim for. However, it’s important to keep in mind that focusing solely on increasing RPMs is not always a good idea. By adding more ads to a web page to increase your RPMs, user experience may take a hit if your users get annoyed with the significant number of ads.
Having visitors who are discontent with user experience can lead to increased bounce rates, which is not good. Too many ads can also slow down your website and lower viewability at the same time.
Which metric is best to use to analyze your earnings?
There’s no right or wrong answer when choosing between RPM vs. CPM. It’s entirely up to you which metric you use, but this would also depend on the ad platform you’re using. For example, if you use Google AdSense or Ad Manager, metrics are displayed as RPM. On the other hand, YouTube reports earnings to publishers as eCPM.
Both metrics are estimates of the exact same information, but the earnings can be different. One thing is sure — earnings are always dependent on the number of impressions you receive.
At Sortable, our analytics and reporting platform reports on different types of RPM and CPM. You also have the ability to go into far more granular metrics like campaign, page, or the user’s OS.
What determines the RPM for a website?
There’s no exact answer to this question as there are so many variables to take into account. These range from your niche, or your page content, to the type of audience that visits your website.
For example, two niche sites with the same kind of content and topics can have different RPMs if their audiences are located in different countries. This can be true for the entire website or can vary from one page to another, depending on the pages users are landing on, too.
Audiences play an important role when it comes to RPMs, as advertisers are willing to pay differently depending on the location of each audience. For instance, websites with organic visitors from North America are typically worth more to advertisers than websites with visitors from Asia who come to the website via social media. Geographics locations such as the USA, Canada, UK and Australia are considered Tier 1 and historically, their traffic is worth more to advertisers.
Seasonality is another factor that has an influence on RPMs. For example, most websites see spikes of traffic and ad earnings during the months of November and December (holiday season). There’s also an inevitable drop in January for many websites, as advertisers are resetting their budgets.
All these factors are different for each website, so it’s important to rely on historic RPM data to determine the best growth strategy. As a publisher, you can make use of RPM data to continue to improve your strategy and grow your revenue.
If you have any questions about RPM, or how you can improve yours, get in touch with our team today at team@sortable.com. Looking for a new Ad Ops partner, see what Sortable can do for you by requesting a demo.