What is eCPM and how is it calculated


What is eCPM and how is it calculated?
The acronym eCPM means ‘effective cost per mille’. It is the outcome of a calculation of the ad revenue generated by a banner or campagne, divided by the number of ad impressions of that banner or campaign expressed in units of 1,000. The ‘M’ for mille in the name comes from the Latin meaning 1,000. The formula to calculate eCPM is not all that complicated, once you realize the components that go into the computation.
Calculating eCPM for a CPM campaign

When the campaign has a rate expressed in CPM (cost per mille), there is not a lot that needs to be done. The CPM rate is by definition identical to the eCPM value of that campaign.

Calculating eCPM for a CPC campaign

For campaigns with a CPC rate, the calculation works like this:
·         you will need to lookup the number of ad impressions over a given period of time
·         you will also need to lookup the number of clicks on these ads over the same period of time
·         and finally you will need to know the CPC rate for the campaign
Once you know this input data, the formula is:
·         multiply the number of clicks by the CPC rate to come up with total revenue
·         divide the number of impressions by 1,000, giving you the number of blocks of 1,000 impressions delivered
·         divide the total revenue by the number of blocks of 1,000 impressions to come up with the eCPM value
Let’s use the following fictional numbers for an example:
·         a campaign with a CPC pricing was displayed 2 million times in a period of 1 day
·         in that same day, the ad server counted 5,000 clicks on the banners of the campaign
·         the CPC rate for the campaign was set to US$ 0.50
We can now calculate the eCPM of this campaign with a CPC rate:
·         total revenue was 5,000 clicks times $ 0.50 equals $ 2,500
·         2 million impressions equals 2,000 blocks of 1,000 impressions
·         the eCPM is $ 2,500 divided by 2,000, equals an eCPM of $ 1.25
In reality, you will probably never see nice round numbers like these, but if you use the formula explained above, it is simple to compute the eCPM value of a CPC campaign for any given time frame.

Calculating eCPM for a CPA campaign
For campaigns with a CPA rate (cost per action, which could be a sale or signup for example), the formula is very similar:
·         You will need to lookup the number of ad impressions over a given period of time
·         you will also need to lookup the number of sales or leads (OpenX calls these ‘conversions’) over the same period of time
·         and finally you will need to know the CPA rate for the campaign
Once you know this input data, the formula is:
·         multiply the number of conversions by the CPA rate to come up with the total revenue
·         divide the number of impressions by 1,000, giving you the number of blocks of 1,000 impressions delivered
·         divide the total revenue by the number of blocks of 1,000 impressions to come up with the eCPM value
Let’s use the following fictional numbers as an example:
·         a campaign with CPA pricing was displayed 2 million times in a period of 1 day
·         in the same day, the ad server measured 100 sales related to the banners that were displayed and clicked
·         the CPA rate for the campaign was set to $ 30 per sale
We can now calculate the eCPM of this campaign with a CPA rate:
·         total revenue was 100 sales times $ 30 equals $ 3,000
·         2 million impressions equals 2,000 blocks of 1,000 impressions
·         the eCPM is $3,000 divided by 2,000, equals an eCPM of $ 1.50
Like in our previous example, it is highly unlikely that there are nice round numbers like this, but the formula is always the same.