What is eCPM and how to calculate it
Updated: January 6, 2020
eCPM is a term that’s thrown around quite often in the mobile advertising world. But it can be quite confusing, especially for new developers looking to monetize their app through in-app advertising. Let’s take a look at what it means and why it matters for app developers.
What is eCPM?
eCPM is a metric used to measure an app publisher’s ad monetization performance. It means “effective cost per thousand impressions,” which in layman’s terms is the ad revenue generated per 1,000 ad impressions.
If app publishers have a high eCPM, it means that the ads served on their app are doing their job and converting users. The more users the ads convert, the more the app publisher gets paid.
eCPM vs. CPM
CPM, or cost per one thousand impressions, is a payment model advertisers use to purchase impressions - a $1 CPM means an advertiser is paying $1 to serve 1,000 ad impressions. Meanwhile, eCPM is the effective cost per one thousand impressions, and is a metric publishers use to measure how much money they're bringing in, regardless of which payment model is being used (CPM, CPE, CPI, etc).
How is eCPM calculated?
eCPM = (total earnings/total impressions) x 1,000.
To calculate eCPM, divide your total advertising earnings by the total number of impressions your app served. Then multiply by 1,000. The final figure is your eCPM, or the amount of money your app earns per 1,000 ad impressions.
What is an eCPM floor?
An eCPM floor, also called a flat eCPM or predefined CPM, is the minimum CPM an ad network must meet to serve an ad on your app. In other words, an ad network will not serve an ad if it's not able to meet the eCPM floor that you pre-set in your waterfall. If an ad network can't meet your eCPM floor, the it will on to the next instance in your waterfall. CPMs can be set on individual or groups of specific countries, and on the global level. Read more about eCPM floors and best practices here.
Why is eCPM important for app developers?
eCPM helps app publishers evaluate and optimize their monetization strategy by letting them compare ad revenue generated across multiple variables, such as ad network, region, operating system, location, etc.
For example, let’s say you want to understand which ad unit is performing better and making you more money. To do so, you’d calculate and compare the eCPM of both.
In a month, you see that rewarded video generated 400 impressions and $5.00 in earnings, while banner ads generated 700 impressions and $3.00 in earnings. It’s hard to compare the performance of the two ad units based on these numbers alone.
But after some quick math, we find that rewarded video has an eCPM of $12.50 and banner ads have an eCPM of $4.29. Now we see clearly that rewarded video is making you more money.
eCPM marketing and advertising takeaways
- There is a widening gap between rewarded video eCPMs and interstitial eCPMs, with the eCPM of rewarded video growing at a much faster pace.
- The gap between eCPM for iOS and eCPM for Android decreased by 20% this past year, showing that advertisers are willing to pay more to reach audiences on Android.
- In terms of ad units, eCPMs in North America had the highest growth rate (35%) while the eCPM of emerging markets was quite a bit lower (10%).
- eCPMs tend to rise sharply at the end of each quarter, possibly because advertisers are eager to finish their budgets before the next quarter begins.
How can you increase your eCPM?
1. Use an ad mediation platform
What is ad mediation? It’s a supply-side platform that with a single SDK integration lets app publishers manage multiple ad networks, making the entire app monetization process much simpler.
If you use mediation, there’s no need to manually calculate and compare eCPM among ad networks. The ironSource ad mediation platform, for example, has a function that automatically fills your ad supply with best performing demand from a wide range of ad networks. It optimizes the demand sources according to response time, fill-rate, and eCPM.
By using a mediation platform that consistently ensures best performing campaigns are delivered first, you can quickly and easily increase your own eCPM.
2. Experiment with different ad formats and remove the ones that don’t perform
There are tons of ad formats out there to choose from today: banners, offerwall, interstitials, video, etc. Each has its own advantages. Be sure to check every so often which ones are performing well and which ones aren’t. If you see that a certain ad unit is consistently delivering low eCPMs, remove it from your ad supply.
In particular, it’s worth checking out rewarded formats, like rewarded video, which are known for its high eCPMs. With rewarded videos, you give users virtual currency or items in exchange for watching a video ad.
Offerwalls can be great too. Lovoo, a German dating app, served offerwall ads to users that lets them unlock premium content in exchange for interacting with an ad. They ended up with $80 eCPMs and found that 10% of users who engaged with the offerwall eventually became paying users. You can read a bit more about it here.
3. Change where you place your ad in the app flow
Be sure to create multiple placements in your app flow for ads, such as at app launch, in between levels, at game-over, on the home screen, etc. The goal is to serve the ads when users will be most engaged, but also not at a moment when it will disrupt their gameplay or in-app experience. Play around with different placements and see where in your app ads perform best.
For example, if you have a timed game, like a puzzle game, you can show an interstitial ad at the end of each time segment or level.
4. Serve your competitor’s ads
It might seem counterintuitive, but in some cases it’s actually genius. If you’re in an app category with tons of competition, it might be smart to serve your competitor’s ads.
Monarc Gaming Labs, a social gambling studio, served competitive ads on Golden Sand Slots for 4 months, and found that the competitive ads accounted for 92% of their overall revenue. The social gambling ad eCPMs were 6 times higher than non-competitive ads.
Golden Sand Slots users -- social gamblers themselves -- engaged the most with ads about other gambling apps because it was super relevant to them. But they remained loyal to Golden Sand Slots because Monarc Gaming Labs made sure to only serve competitive ads to high LTV users. Check out the case study here.