Monday, February 27, 2006 | 10:25:00 AM
eCPM is a bit of industry shorthand that seems here to stay. You've seen it listed in your AdSense reports; it means, "effective cost per thousand impressions." So how is eCPM calculated, you ask?
eCPM is calculated by dividing total earnings by total number of impressions in thousands. It is a great performance measure for your various ad units, so when experimenting, you can use eCPM to compare your results.
But what if your site doesn't receive enough impressions to have a large sample size? Even for smaller sites, eCPM can be a useful statistic to track ad performance.
For example, let's imagine we have two custom channels named 'Blue Skyscrapers' and 'Red Rectangles', respectively, which reflect the types of ad formats we're testing on our site. During our test, the 'Blue Skyscrapers' channel receives 370 page impressions and $1.48 in total earnings. The 'Red Rectangles' channel receives 187 page impressions and $0.97 in earnings over the same period. To make these figures more comparable we calculate eCPM -- i.e., the estimated earnings for every 1,000 impressions received. We find that eCPM for blue skyscrapers is $4.00 while the eCPM for red rectangles is $5.18.
This means if we received 1,000 impressions of blue skyscrapers, we would earn roughly $4.00. But for 1,000 impressions of red rectangles, we would earn about $5.18. Therefore, assuming that our sample size is large enough, it is to our advantage to switch to red rectangles throughout our site because they generate more revenue per impression.