CPM vs RPM Debate: Balancing Metrics for Maximizing Earnings

The acronyms CPM and RPM are incredibly popular in digital advertising, and there’s a reason for that. A deep understanding of them is critical for successful content monetization. But what do they mean? Are they synonyms (they do sound alike, after all)? And why should you care about distinctions between CPM and RPM?

Well, buckle up because, in this article, we’ll answer all these questions and many others. You’ll learn how to calculate CPM and RPM, find out what factors affect these metrics, and how they are connected to YouTube.

When you finish reading, you’ll know some digital advertising secrets and will solve the puzzle of CPM vs RPM once and for all.

What Is CPM, and How Can It Be Calculated?

CPM is among the oldest and most popular metrics in programmatic advertising, along with CPL, CPC, etc. It stands for cost per mille (thousand impressions). So, CPM shows how much the advertiser pays for 1,000 ad impressions.

The formula is pretty straightforward:

Therefore, if your campaign costs $200 and receives 100,000 impressions, its CPM is $2. Every thousand impressions cost you $2.

Over the years, CPM has become an industry standard, primarily due to its simplicity and predictability. It allows advertisers to understand how much they spend on campaigns. However, it’s not the only valuable metric in programmatic advertising, so let’s move forward!

What Is RPM, and What’s Its Formula?

RPM is somewhat similar to CPM and stands for revenue per mille. This indicator measures the publisher's revenue for every 1,000 ad impressions. So, the formulas look a lot alike.

For instance, if the publisher got $300 from 100,000 impressions, its RPM equals $3, which means average earnings of $3 for every 1,000 impressions.

Similar to CPM, RPM is a valuable metric. It allows publishers to estimate potential financial gain from their content, analyze ad inventory performance over time, and evaluate their monetization strategy.

CPM vs RPM: The Key Differences

While CPM and RPM have much in common (for example, two out of three letters), they aren’t the same. Here are some of the main differences:

1. Perspective. CPM describes the cost of running an ad campaign, which makes it more advertiser-centered. RPM is about revenue, so publishers benefit from it in the first place.
2. Purpose. Advertisers use CPM to plan campaigns and decide on a budget. Publishers use RPM to estimate their revenues and content monetization steps.
3. Fluctuation. RPM is more prone to changes because it may be affected by ad performance, seasonal trends, and other factors. CPM is often agreed upon in advance so advertisers know how much 1,000 impressions will cost them.
4. Magnitude. Typically, advertisers or publishers track CPM of every campaign separately, while RPM calculates the revenue from all ads within the same content.
5. Focus. CPM often represents ad exposure and campaign reach, while RPM measures revenue generation potential.

Also, it’s vital to say that RPM does not necessarily equal CPM, even when applied to the same ad inventory. RPM takes into account click-through rates and other factors that may affect revenue.

What Are CPM and RPM on YouTube?

YouTube is probably the most beneficial platform for video content creators and advertisers. That’s why ad buyers and sellers must comprehend the nuances of comparing YouTube CPM vs RPM.

Let’s adjust the definitions first. CPM on YouTube is how much advertisers pay for 1,000 views, and RPM estimates the YouTuber’s revenue per 1,000 views (includes earnings from ads, YouTube Premium, etc.).

Many factors can affect both metrics, from content type and length to viewers’ demographics and seasonal fluctuations.

Similar to the general idea of CPM vs RPM, RPM is a very convenient metric for YouTube publishers. It helps them understand the efficiency of their monetization strategy and compare revenue from different videos or the same video over various time frames. Also, if the creator understands the factors affecting RPM value, they can increase their earnings. For example, make videos longer to offer more ad placements.

As for CPM, advertisers are interested in this metric because it can help them decide on the types of ads for their campaigns. YouTube offers different ad formats and options, but their CPMs vary. For example, advertisers can choose more targeted and expensive ads or choose cheaper alternatives (say, if they are increasing brand awareness instead of aiming for conversions).

A final note on comparing YouTube CPM vs RPM: RPM here is often lower than CPM. The explanations include the platform’s share of revenue and the usage of ad blockers, which may result in lower earnings.

Playback-Based CPM vs RPM

Another valuable concept for YouTube creators and advertisers is playback-based metrics (particularly CPM and RPM). Sometimes, standard YouTube CPM counts all ad impressions, even when the video content wasn’t played, and RPM includes all views, even those not monetized.

On the other hand, playback-based CPM is how much advertisers pay for 1,000 video plays with an ad included, and playback-based RPM stands for revenue per 1,000 plays. So, the main difference between standard and playback-based metrics is that they focus on playing the content instead of just showing the ad. This distinction makes playback-based CPM and RPM useful both for advertisers (they can be sure of paying for actual views) and publishers (they can get a more precise understanding of the content performance).

Now, let’s take a closer look at playback-based CPM vs RPM. While this type of CPM takes into account video plays only with an ad shown, playback-based RPM includes all views, even if they weren’t monetized. That’s one of the reasons why playback CPM is usually higher than RPM.

Still, it’s crucial for content creators and advertisers to understand how both metrics work. In this case, they will plan their efforts more consciously.

Why Both CPM and RPM Are Important for Publishers

As we’ve mentioned, CPM is an advertiser-centered metric. However, it doesn’t mean publishers can’t benefit from it. On the contrary, combining insights from CPM and RPM helps maximize revenues.

CPM’s Significance for Publishers

Tracking CPM is useful for sellers because high numbers mean advertisers are willing to pay a lot for their ad inventory. Also, CPM helps set relevant prices for placing ads.

So, simply put, CPM is a valuable source of insights for publishers. With its help, they make better pricing decisions and optimize their ad inventory to maximize revenue.

RPM’s Significance for Publishers

One of the main advantages of RPM is its holistic nature. It includes all revenue sources of the publisher’s website and helps evaluate the monetization strategy as a whole. Also, it allows sellers to identify the most profitable sections and put more effort into them, leading to higher earnings.

Complementary Metrics

Combining CPM and RPM can provide publishers with comprehensive insights. For instance, CPM helps estimate ad performance, and RPM focuses on monetization success. Therefore, CPM may be a source of ad placement and pricing optimization ideas, while RPM allows sellers to find ways to earn more.

Moreover, tracking both metrics over time helps identify advertising market shifts (CPM) and the dynamics of the media buying business (RPM).

Clearly, there’s no need for publishers to choose only one option in the CPM vs RPM debate. Each metric is advantageous in its unique way, and combining them may bring a synergistic effect to life.

Is CPM Better Than RPM?

As we’ve already discussed, every metric serves its purpose. For CPM, it’s evaluating ad performance. In the case of RPM, the goal is to estimate the monetization techniques used. So, there’s no single answer to the question about the best option out of two.

Usually, the publisher benefits the most from combining both metrics instead of trying to solve the dilemma of CPM vs RPM.

Why my RPM Is Higher Than CPM (or Vice Versa)

Another advantage of using both metrics is the opportunity to compare them and draw essential conclusions from the distinction between them. The situations when CPM is higher or lower than RPM are pretty standard, and we’ll offer you several reasons for that.

CPM is Higher Than RPM

The first reason may be ad blockers. If more customers use them, CPM will remain stable, but RPM will suffer. The same happens when ads aren’t visible to the website’s audience.

Second, the website load speed may impact RPM. If it’s low, you can expect RPM to decrease compared to CPM.

Third, seasonal trends may present a valid explanation for RPM lower than CPM. Commonly, CPM surpasses RPM significantly when it’s a “high season” in programmatic advertising.

RPM is Higher Than CPM

One of the most widespread scenarios includes multiple ads on the same page. In this case, each contributes to RPM, so it becomes higher than CPM.

Also, since RPM is accountable for all revenues (not only from display ads), it may exceed CPM if sponsored content or other sources are present.

Also, high-performing ad formant and ad refreshing tactics for users who stay on the page longer can be responsible for higher RPM.

In any scenario, publishers must understand what may affect the CPM vs RPM comparison. After all, it’s the first step to optimizing ad inventory, pricing strategy, and user experience.

What Factors Affect Both Metrics

You already know a lot about the relationship between RPM and CPM. Still, before we conclude, let’s explore factors that impact both these metrics.

1. Demographics (age, income, geographical location). For instance, audiences from countries like the USA can bring more revenue and increase CPM.
2. Ad placement. The more viewable it is, the higher CPM and RPM will be.
3. Ad formats. Some of them provide higher results than others. For example, video ads have higher CPM and RPM than text banners.
4. Niche. Advertisers are willing to pay more on some websites (providing engaging content on popular topics), and RPM is usually higher, too.
5. Quality. It’s about both traffic and content quality. Organic traffic and exciting content are friends of high CPM and RPM.

This list of factors isn’t complete, but it offers publishers an initial set of ideas of what to pay attention to.

RPM vs CPM: Which Metric Should the Publisher Use to Analyse Revenues?

CPM and RPM are valuable tools, and deciding which one to use should be based on the publisher's goals. For instance, RPM is better suited for analyzing the website performance and evaluating the monetization strategy. At the same time, CPM helps assess ad performance and optimize ad placements.

Nevertheless, publishers can achieve the best results when using both metrics. In this case, they draw the maximum value from complementary insights and make balanced decisions. After all, the perfect way to master any subject is to form a comprehensive view of it.

Whatever metrics they use, publishers need a convenient solution to track and analyze indicators. Epom Ad Server provides reports with 40+ metrics, so assessing revenue becomes simple. Moreover, you can try it for free and see if you’re happy with it!

FAQ

• What is CPM, and how do you calculate it?

  CPM stands for cost per mille (thousand impressions). So, CPM shows how much the advertiser pays for 1,000 ad impressions. The formula is pretty straightforward: CPM = (total campaign cost / number of impressions) * 1000

• What is RPM, and what’s its formula?

  RPM stands for revenue per mille. This indicator measures the publisher's revenue for every 1,000 ad impressions. The formula is: RPM = (total revenue / number of impressions) * 1000

• What are the main differences between CPM and RPM?

  Some of the main differences are perspective (CPM describes the cost of running an ad campaign, which makes it more advertiser-centered. RPM is about revenue, so publishers benefit from it in the first place), purpose (Advertisers use CPM to plan campaigns and decide on a budget. Publishers use RPM to estimate their revenues and content monetization steps), and fluctuation (RPM is more prone to changes because it may be affected by ad performance, seasonal trends, and other factors).

• What are CPM and RPM on YouTube?

  CPM on YouTube is how much advertisers pay for 1,000 views, and RPM estimates the YouTuber’s revenue per 1,000 views (includes earnings from ads, YouTube Premium, etc.).

• What are playback-based CPM and RPM?

  Playback-based CPM is how much advertisers pay for 1,000 video plays with an ad included, and playback-based RPM stands for revenue per 1,000 plays. So, the main difference between standard and playback-based metrics is that they focus on playing the content instead of just showing the ad.

• Is CPM Better Than RPM?
  Every metric serves its purpose. Usually, the publisher benefits the most from combining both metrics instead of trying to solve the dilemma of CPM vs RPM.