CPM, RPM – potatoes, patatas, right? Wrong. In fact, there’s a very good reason that the digital publishing industry is transforming itself to measure revenue and visit value over cost per thousand impressions. In this article, we’ll show you why.
What is CPM?
CPM stands for cost per mille or “cost per thousand” (mille is Latin for thousand). In marketing, it’s the amount that an advertiser must pay for every thousand views (impressions) that their ad gets.
Who Uses It?
Originally, this was a straightforward metric used by publishers and advertisers, before they had access to the vast pools of data that are at their fingertips today. Now that there is so much nuanced detail available about how readers interact with content (and ads), though, CPM comes up short.
This is still a useful metric for advertisers who are figuring out their marketing budgets. However, it isn’t nearly as useful for publishers who want to calculate and analyze their ad revenue and, more importantly, their profits, for each page of content. Not to mention each reader who comes their way.
Knowing your CPM is easy – that’s a fixed number. However, figuring out the bottom line, your profit margin on a page of content that may contain several ads, is more challenging.
But more of that in a moment.
What Are the Limitations?
In the past, publishers and advertisers would simply agree on a set CPM and everyone would walk away happy. Today, though, advertisers can use a range of tools to find out more and more information about their audience and how this audience interacts with content and ads on a website. This allows them to be more specific and demanding than ever before. They can then use all these insights as leverage with their publishing partners.
As pressure piles onto publishers to prove their value to advertisers, this means that you need a far more effective way of linking each piece of content to all the different sources of ad revenue that are connected with it. In fact, you need to go further, by linking ad revenue not only to content, but where you distribute that content, when, and through what device.
What is RPM?
This leads us to a far more effective formula for publishers to assess what’s working for them: RPM, or “revenue per mille.” This tells you your estimated revenue for every 1000 impressions you receive.
Aha, I know what you’re thinking: what’s the difference? And yes, if we simply left it here, CPM and RPM would be basically the same thing.
RPM tells you the total revenue for the entire page (per 1000 views), whereas CPM tells you the average cost per 1000 impressions
Now, let’s go a step further. While RPM is a great start, what you really need to figure out is your visit value.
That’s because readers don’t necessarily just look at one page of content. Ideally, they’ll browse a number of pages or articles while they’re on your site. To figure out how much profit you made from a particular reader, you need to multiply your RPM by the number of pages that reader engaged with. This is your visit value.
In simple terms, the calculation looks like this:
UV = RPM / 1000 x Page Views
It’s vital that you have a clear way to calculate visit value in order to figure out your profits. It’s not enough to chalk up how much you spent on distribution on one side, and how much revenue you earned from advertising on the other. Making visit value your key metric helps you establish precisely what your ROI was on a specific campaign, after you’ve tallied up all the ad revenue you earned from readers drawn from that campaign.
Only visit value will give you the granularity you need to refine these decisions and keep maximizing your profits in the long run.
How This Helps
Armed with this information, you are far better equipped to analyze which distribution channels are bringing you the most revenue.
Once you know how much each reader of a particular piece of content is worth to you in terms of ad revenue per visit, you can also start to distinguish between campaigns to really understand where you’re getting the best value.
You can also cross-reference this with the amount you’re paying external platforms to place this piece of content in order to rapidly assess your ROI for each campaign.
This gets even more interesting when you look at how many articles each of these visitors engages with once they get to your site, as every new piece of content they read contributes to your RPM and overall UV.
In fact, by rolling out a technology solution that can integrate with all your platforms, automatically calculate UV for every strand of every campaign and take into account marketing spend to give you detailed figures on ROI, you can continue to hone your approach. This allows you to drive better and better results both for your company and your advertising partners.