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May 3, 2024
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How to Calculate And Improve eCPM?

The effectiveness of advertising plays a huge role for advertisers and the platforms on which they are broadcast. The location of the ad, the volume of the advertising post, and the target audience for which it is designed — all this must be taken into account when launching since these factors affect the eCPM indicator. In this article, you will learn about eCPM calculation, as well as ways to increase this indicator.

What is Programmatic Advertising?

Programmatic advertising is an automated approach to purchasing advertising spots (display locations) according to the required settings for price, audience, and other metrics.

Programmatic platforms accumulate an audience, segment it according to various criteria, conduct an automated instant auction between advertisers for the right to show an advertising message to a certain audience, and immediately show this or that user an advertisement on the site on which he is currently located.

What Methods of Buying Advertising Are There in Programmatic?

RTB auction is the most popular and well-known procurement method. The terms RTB and Programmatic are often equated with each other, but purchasing advertising using an algorithm is possible without an auction.

Closed auctions (private marketplace, PMP), in which participation is available only by invitation. Platforms allow advertisers access to unreserved advertising space. Prices at such auctions are usually higher than at open auctions. Their advantage is that the brand has the opportunity to buy space from premium sites that do not participate in an open auction.

Direct purchase (programmatic direct) – in this method there is no auction, the CPM price is fixed. The choice and reservation of places, and the volume of placements are on the advertiser’s side. The price with this model may be higher than in open auctions, where there are bids for placement. This method also differs from classic direct placement, since programmatic advertising will show only to the necessary target audience.

Benefits of programmatic advertising:

  • automation of actions and minimization of manual work;

  • quick control and launch;

  • transparency and a single interface for displaying advertising on thousands and millions of sites;

  • lack of direct negotiations with sites.

eCPM (effective Cost Per Mille) in programmatic advertising is a key metric used to measure the effectiveness of advertising campaigns. Let's find out about it in more detail.

What is eCPM in Advertising And Why Should You Track It?

eCPM is a metric used in the advertising industry to measure the effectiveness of advertising placements. It shows how much money an advertising platform makes for every 1,000 ad impressions, taking into account all possible sources of income such as clicks, conversions, and other forms of interaction with advertising.

eCPM is often used to compare the profitability of different advertising formats, distribution channels, and geographic markets. This allows advertisers to determine which channels are most effective for their advertising and which markets to focus on.

The Importance of eCPM in Online Advertising

This indicator is important for both advertisers and the site. With its help, the monetization of individual formats and the effectiveness of placement on the page are assessed. When there is high competition for the attention of the same group of users, eCPM helps determine which ad will receive more reach.

The higher the eCPM of your ad, the more often it will be shown to an interested, active, and paying audience.

How to Calculate eCPM?

The calculation algorithm changes depending on the selected payment model. For calculations you may need:

  • Cost per action (CPA).
  • Click-through rate (CTR).
  • Conversion Rate (CR)
  • Ad coverage.

CPA, CTR, and CR allow the system to calculate how much to write off from the advertiser’s budget for ad impressions.

General eCPM formula: (campaign cost / number of impressions) x 1000.

If the payment model for impressions was selected when setting up your account, eCPM will be equal to the selected CPM rate. For CPC, the target action is a click, and for CPI, the target action is installing an application. Based on this, we obtain the following formulas:

When paying for clicks: eCPM = CPC x CTR x 1000.

When paying for installation: eCPM = CPI x CTR x CR x 1000.

What is The Difference Between CPM And eCPM?

CPM and eCPM measure the cost of ad impressions per thousand impressions, but there are differences between these metrics.

CPM measures the final cost an advertiser pays for every 1,000 impressions of their ad. And eCPM measures the effective cost per thousand impressions of an ad, taking into account all possible sources of income (for example, clicks). This means that the metric takes into account not only the number of impressions but also how those impressions turn into money.

If CPM shows how much an advertising campaign costs you, then eCPM is an indicator of how profitable you invested your money.

What affects eCPM?

This indicator depends on many factors. It should not be considered without context, as it will be difficult to compare and evaluate effectiveness. Here are a few factors that influence eCPM:

  • Advertising location. Advertising that is placed in a zone of good visibility brings in more income, and it also has a greater number of impressions.
  • Location. Publishers who operate in large advertising markets report high eCPM.
  • Seasonality. In the summer, the amount of advertising may decrease, but before holidays and certain dates (Black Friday, for example), advertising inventory sells better, and competition for space on sites between advertisers increases.
  • Website/application speed. This factor influences the user experience—whether the user will interact with the content.
  • User engagement. On a site with loyal visitors who return frequently, eCPM may be higher.
  • Advertising format. Video will cost more than banner advertising, which will also lead to an increase in eCPM.
  • Audience coverage. Publishers with a niche audience tend to have higher rates than those who target a broad range of users.

How to Increase eCPM?

You can increase your eCPM by optimizing your monetization strategy, as well as working in the following areas:

Testing different ad types and formats.
Cooperation with different SSPs and advertising networks will help generate more demand.
Increased traffic to the site.
Improved ad visibility. Advertisers often target locations with high visibility and pay more to get impressions in those locations.

Final Thoughts

The eCPM metric allows you to calculate the effectiveness of advertising placement. This parameter is extremely important for both publishers and advertisers alike, so ad exchange owners should do everything they can to help them achieve their goals. If you want to launch your own programmatic advertising solution that will allow users to achieve high eCPM, we recommend turning to SmartHub.

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Last Updated 3 weeks ago

About the Author

Communication Square drives your firm to digital horizons. With a digital footprint across the globe, we are trusted to provide cloud users with ready solutions to help manage, migrate, and protect their data.

Communication Square LLC

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