Revenue Optimization
Author: Setupad Team 5 minute read
#Cpm #Monetization Metrics #Seasonal Optimization
All Categories >Revenue Optimization > Average eCPM Can Be Misleading for Publishers

Average eCPM Can Be Misleading for Publishers

Publishers often evaluate the overall results by looking at the average eCPM. This can be right for a quick evaluation of overall performance and comparison. However, it doesn’t describe the full picture unless all other factors are similar.

In other cases, comparing the average eCPMs can be misleading.

In this article, you will learn why.

But before digging more into details, let us remind the definition of eCPM.

What is eCPM?

eCPM stands for ‘effective cost per mile’ or cost-per-thousand ad impressions. eCPM illustrates the ad revenue generated by the publisher from 1000 ad impressions. 

It is the average number of multiple CPMs, and it gives the combined average of all advertiser bids for your ad impressions.

What is a Good eCPM?

There is no right answer because the average eCPM is affected by several factors like: 

For example, if your main traffic is from the US, the good eCPM would be from €5 to €10. However, if it’s from India–€0.40 to €0.50.

What are average eCPM rates? 

The answer–depends on the previously mentioned factors. 

For example, if your main traffic is from India, usually the average eCPM rates are between €0.10 to €0.30, the US–€2 to €5.

Why can Average eCPM be Misleading?

Let us give you an example!

We took the results from one particular ad placement over a short period. We analyzed how different bid values are allocated and where does the average eCPM result stand. The results were as followed:

  • Ad impressions – 268 731
  • Fill rate – 98,86%
  • Average eCPM – €0,75
  • Total revenue – €202,45

How to calculate average eCPM?

Average eCPM = (Total Revenues / Total Impressions) x 1000

(€202,45 / 268 731) x 1000 = €0,75 (average eCPM)

We divided all impressions into deciles, each with a similar amount of impressions with particular bid prices. The last decile has a little fewer impressions, but that doesn’t affect the findings.

What can we learn from this data?

The changing part is revenue. The graph below shows how much ad revenue is generated at different price deciles. Naturally, there are more impressions with the lower prices. Therefore, the intervals are shorter on the first deciles and become wider and wider as the price increases.

We have to pay attention to how much of the overall revenue each of the deciles contributes.

The last decile (>€2,31) has the most extended CPM interval because a minimal amount of impressions falls into this top tier.

Usually, these are retargeting campaigns, for which advertisers are willing to pay higher prices for a single impression.

According to the graph below, we can see that this price level (>€2,31) contributes to the most significant part (45.7%) of the overall ad revenue.

Only 11,5% of total ad revenue is from the impressions sold around the average price range (€0,69 – €1,08).

All deciles with a smaller than the average bid price contribute 22,3% to final ad revenue.

Why are there low CPMs?

The low CPMs (in this case, €0,01 – €0,68) usually come from:

  • less developed markets where programmatic is not as advanced as in the rest of the world;
  • fresh cookies that don’t provide detailed information for advertisers, so they are unwilling to place higher bids.

Even though the low CPMs bring down the average price, it is still a significant revenue source.

Quite often, the low bids are used by advertisers for checking how valuable the ad inventory is. However, restricting them with a floor price can result that advertisers won’t give higher bids later on.

Stigma Around ‘Average Results’

We usually compare and make decisions based on the average eCPM, but in the end, it doesn’t represent the whole picture accurately.

In between the CPMs that bring the most significant and lowest revenue is the ‘average price’, which publishers notice even though it contributes to the lowest overall revenue share.

As yield managers at Setupad, we see our final result is evaluated based on the average result.

Of course, this is mathematically correct, however, it does a lousy job of reflecting all the revenue sources.

The average price disregards the most valuable vital contributors where yield management is making the most significant impact.

Final Thoughts

The most significant revenue share comes from the highest CPMs. Optimizing the highest CPMs determines the final results as they are the biggest contributors to total ad revenue.

Selling more impressions for €0,50 or €0,60 CPM won’t bring you the highest revenue share. It is essential to understand that the best practice is to monetize the entire ad inventory to avoid losing a significant part of revenues.

Optimization is the key to get higher revenue, and this should be the primary focus when it comes to selling ad inventory. Setupad can help to sell your ad inventory at the highest possible price to premium advertisers. Join us now!

About Setupad Team
Setupad Team are experts in programmatic advertising and header bidding.

message icon message icon big