Monday, December 10, 2007

eCPM - What It Is And How To Use It

I have been asked this question several times and noticed it in a comment here recently so here is a quick explanation of what the eCPM means in adsense and other places as well. I calculate this for my contextual advertising programs and my ppc campaigns as it a very useful tool.

eCPM is "effective cost per thousand." The m is a holdover, I'm assuming, from manufacturing where it is "cost per million." It is basically estimated earnings for every thousand impressions received. Don't be fooled by excessively high numbers at the start because as your sample size, i.e. impressions, increase your eCPM will most likely drop.

eCPM is calculated by dividing your earnings by your impressions in thousands.

earnings
-------------- x 1000 = eCPM
impressions

I use it to compare ad units to help find optimal color, size, left/right placement etc.

example:

ad unit 1 has 500 impressions with earnings of $2.00 giving you an eCPM of $4.00. ad unit 2 received 400 impressions with earnings of 1.75 for an eCPM of $4.38.

This means that if you received 1000 impressions for ad unit 1 you would earn rougly $4.00 and for ad unit 2 roughly $4.38. Assuming your sample size is large enough to give you statistical significance it would be to your advantage to switch to ad unit 2 as they would generate more revenue per thousand.

hope this helps

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