What does RPM mean?
In digital marketing, the RPM price means that every time something happens 1,000 times, it will earn you that price. The something you sell can be anything – such as ad impressions, page impressions views etc.
So for example, if you sell 1,000,000 ad impressions at £2 RPM, as a result, you would pay £2,000. This is because for every 1,000 ad impressions you sell, you are being paid £2.
Note: Revenue Per Thousand in online advertising is the most advantageous type of deal for website owners in most cases. This is because you are simply selling ad space without promising how ads will perform in that space (ie it’s an easy type of deal to manage).
RPM stands for Revenue Per Thousand (M is the roman numeral for 1,000). It is the amount the publisher is paid per thousand of something (eg impressions or pages).
It is essentially synonymous with CPM. This is because most people use CPM to talk about buying or selling advertising. However, when selling advertising you are actually paid on an RPM basis rather than a CPM.
RPM and CPM are not actually the same however – the RPM is almost always lower. The difference between the two is all the costs involved in making the advertising run. These costs include things like the fees paid to agencies and services, as well as revenue shares with ad networks.
Therefore the RPM a website receives from running advertising is almost always lower than the CPM the advertiser pays. With display advertising, it is likely to be around 50% lower in fact.
Note: As RPM is generally thought of like the mirror image of CPM, it is almost always used as shorthand for Impression RPM (as CPM does mean Cost Per Thousand Ad Impressions). It doesn’t inherently imply a thousand of anything however and could mean Page RPM just as easily.
The RPM equation is:
RPM = (Ad Spend ÷ Impressions) x 1000
You can calculate RPM in the following ways (as well as by using our RPM calculator):
- Ad Spend multiplied by 1000. Then divide the result by whatever actions you are measuring.
- Ad Spend divided by whatever impressions you are measuring. Then multiply the result by 1000.
- Weird version: CTR multiplied by CPC multiplied by 1,000.
What it looks like
Note: It would actually not end here most likely. Ad networks could have their own ad serving fees too, and often give agencies discounts of up to 20%. Therefore it wouldn’t be surprising if the final figure from a £3 CPM was more like £1.50 Impression RPM. The ad network would only present the final revenue to the website, however, and the agency would never break the figures down like this, so neither would find this out.
This is one of many reasons why direct deals can be advantageous to both advertisers and websites. However this, of course, doesn’t take into account the added value of the expertise both advertiser and website are getting, and the consistency of revenue/opportunity they are provided. It is much more difficult to go it alone!
RPM is mostly used as a measure of how much ads are earning rather than an actual price for selling ads. This means that instead of a website saying to an advertiser
“We sell ad space at £2 Impression RPM“
What actually usually happens is a website will sell ad space based on many different ad pricing models (such as CPC, CPM etc). They will then convert it to an RPM basis for their own optimisation purposes (ie seeing which ads actually paid most for space).
This technically means that most of the time an eRPM or effective RPM is being used (like an eCPM), however, this term is almost never used.
It should also be noted that although a CPM will be agreed at the start of a deal, an RPM won’t usually be finalised until after a campaign finishes. This is because there are lots of uncertain factors that could affect revenue and change the final RPM.
These factors include things like click fraud or companies going bankrupt. In either case, the revenue could change significantly and a website would be paid less, despite the original CPM remaining the same.
Average RPM Rate
There are no stats available for average RPM as it is an underused term. However, CPM average rates in 2015 were around $3 (about £2). This means between £1-£6 (approx. $1.50 to $10) is probably a reasonable range for display ads. This, in turn, implies that a good estimate for average RPMs would be between $0.75 and $5.