So you know what CPM stands for: the cost per thousand ad impressions. But the question is, how is it used?

CPM is typically used throughout the advertising industry as a measurement of how much your inventory, that is your internet space available for advertising, is worth at a given time. CPMs can fluctuate based on supply & demand, time of year, sales cycles, traffic and other internal & external factors.

So, how do you know if your CPM is right? Well, that takes time to determine, and over time you will find the market value of your inventory.

eCPM is the Advertising Term for effective CPM. You will see each of your advertising agency & adserver will mention eCPM along with the CPM for your advertising layout. eCPM is used to compare ad sellers against each other.

Let me explain that with an example:

1. Your site metrics are 10,000 impressions per month

2. Ad Rep Firm A: They offer you a CPM of $10 on all the sold impressions per month. They sell 1,000 impressions (10%) during the month and send you a check for $10. Your effective CPM is $1.00 ($10 ÷ (10,000 ÷ 1000)). Note that an ad agency may not always be able to show advertisement every time someone opens your website. Hence they also quote a fill rate (as a percentage) showing how many times they have been able to display ads compared to the total number of times your website was viewed.

3. Ad Rep Firm B: During the course of the month, Firm B sells 70% of the impressions at a $3. At the end of the month, you receive a check for $21.00. Your eCPM is $2.10 ($21.00 ÷ (10,000 ÷ 1,000)).

As you can see, even though Firm B was giving you a much lower CPM, your eCPM was much higher. Ultimately, the goal is to get the number of ads sold per month as high as possible while maximizing the CPM of the ads sold. This will yield the most amount of money for you!

So while you consider an ad agency for your websites, you should also take account of the CPM & the fill rate that your ad agency supplies. Either one alone will not help you estimate your total ad revenue.