Digital advertising is the trend in today’s business. Advertising is easily possible through digital media to reach out to millions of customers.
People widely use social media platforms to spend their leisure time. The browsing pattern of the user and the most visited site patterns give an idea to the business owners to target the audience with the product they want to market.
Technology has reached the level where a user’s browsing pattern can fetch advertisements for his likes. These advertisements feature whenever the user browses the websites or spends time on social media.
All the business owner requires is for the user to view the Advertisement, and if they like it can purchase it then and there. This allows the business owner to market his products without being physically involved in sales.
The digital world has a lot of marketing plans for advertisers to publish the advertisement. At this point, two critical jargons are to be understood: The publisher and the Advertiser.
Advertiser: A business owner or an organization that wants to feature advertisements on websites and social media platforms.
Publisher: They are social media platforms, websites, or any intermediary to connect with the web platform, which can feature the advertisements for the audience’s view and action.
In simpler words, the advertiser is the marketer, while the publisher is the market introducer. There are many essential metrics involved in this marketing process to ascertain the marketing campaign’s effectiveness.
The two most important metrics of digital advertising are CPM and eCPM. Both the parameters work hand in hand and differ in certain aspects.
- CPM: Cost Per Mille
- eCPM: Effective Cost Per Mille
Key Takeaways
- CPM stands for cost per mille, the cost an advertiser pays for 1,000 ad impressions. In contrast, eCPM stands for effective cost per mille and is a calculated metric considering additional factors like click-through rate (CTR) and conversion rate.
- CPM is a straightforward way to measure the cost of advertising, while eCPM provides a more nuanced understanding of the effectiveness of advertising campaigns.
- CPM and eCPM are commonly used in digital advertising to help advertisers evaluate the success of their campaigns and optimize their spending.
CPM vs eCPM
The difference between CPM and eCPM is that CPM is the buying model for publishing an advertisement. In contrast, eCPM is the metric that reveals the marketing campaign’s effectiveness, which gives the revenue generated effectively for every 1000 impressions of the ad.
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Comparison Table
| Parameter of Comparison | CPM | eCPM |
|---|---|---|
| Meaning/Definition | CPM is defined as the Cost paid by the advertiser to the publisher per 1000 advertisement impressions. | eCPM is the adequate revenue generated through the campaign per 1000 impressions. |
| Formula for calculation | CPM = (Advertisement Cost/ No. of Impressions) X1000 | eCPM = (Total revenue generated/No.of images)X1000 |
| Purpose | CPM is the buying model. It is the charge to pay the publisher for publishing the advertisement per 1000 Ad impressions. | eCPM is the metric used to calculate the effectiveness of the campaign. |
| Dependency | CPM entirely depends on publishing costs. | eCPM relies on the revenue generated. |
| Hierarchy | CPM is preceded first in a marketing campaign. | eCPM succeeds CPM, and it is always calculated at the end of the campaign. |
What is CPM?
CPM abbreviated as Cost Per Mille is the measurement the publisher uses to charge the advertiser for advertising on their platform. It is the charge paid by the publisher for every 1000 impressions of the advertisement featured on the advertiser’s web platform.
CPM is otherwise called as Cost per Thousand impressions of the advertisement. The publisher shall opt for this model to feature the ad so that the audience can view this and take further action.
CPM is calculated as the cost of the advertisement placement on the website for the marketing campaign in terms of 1000 ad impressions.
For example: if the total cost for the advertisement placement is $50
if the Advertiser has opted for 10000 impressions, then the CPM is $5. This means that the advertiser must pay $5 per 1000 ad impressions to the publisher.
This is an important metric to make the marketing plan cost-effective. CPM is also used to compare the cost with other platforms for the advertiser to decide upon.
This metric can successfully help advertisers to analyze post-campaign reviews.
CPM is also an essential parameter for publishers; most advertising campaigns happen through social media. This is ideally done because social media is where the audience’s presence is high.
CPM does not give any result as such to the advertiser. The audience view is the initial stage for any marketing campaign; once the Ad is impressive to any user and they click, the job of CPM is over.
What is eCPM?
eCPM, abbreviated as Effective Cost Per Mille, is a critical parameter that reveals the effectiveness of the advertisement campaign. The metric shows the adequate revenue generated by the advertisement campaign per 1000 Ad impressions.
CPM is a buying model, whereas eCPM is the vital metric for the advertiser to understand the campaign’s effectiveness. It is calculated with the revenue generated out of the campaign.
For example: If the revenue generated by selling products is $100
If the sale has happened within 40000 Ad impressions. Then, the effective Cost Per Thousand Mille is ($100/40000) X1000 = $2.5. That means to say eCPM of this campaign after making a revenue of $100 is $2.5
Comparing this with the CPM can give an idea to the publisher whether the campaign was successful or not. The formula for calculating eCPM is (Total Earnings/ No. of Ad impressions) * 1000
eCPM is helpful in many aspects for the publishers when a direct-response Advertisement campaign is featured. eCPM is also used to compare site performance and the average revenue earned.
eCPM is also an essential metric for advertisers; it helps them understand how the campaign impacted the audience. This allows them to take corrective actions in future campaigns too.
eCPM is an excellent comparable metric with the CPM, as the latter is a buying model, and the adequate revenue generated from the drive can also contribute to profitability.
Main Differences Between CPM and eCPM
- The main difference between CPM and eCPM is CPM is the metric where the advertiser pays the publisher for every 1000 advertisement impressions, while eCPM is the metric that calculates the effectiveness of the advertisement campaign per 1000 Ad impressions.
- These two essential metrics have their formula too: CPM = (Advertisement Cost/ No. of Impressions) X1000 while, and eCPM = (Total revenue generated/No. of impressions) X1000.
- CPM is the buying model, and its primary purpose is to identify a platform feasible for the advertiser, while eCPM’s purpose is to give the campaign’s effectiveness.
- CPM completely depends on Publisher cost, while eCPM depends on the revenue generated from the campaign.
- CPM is the process of entering the advertising campaign, while eCPM is the process of ending the campaign.
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Sandeep Bhandari holds a Bachelor of Engineering in Computers from Thapar University (2006). He has 20 years of experience in the technology field. He has a keen interest in various technical fields, including database systems, computer networks, and programming. You can read more about him on his bio page.
