- 29 Jan
- Eric Hochberger
What is RPM, and How Mediavine Calculates it
RPM. This metric has become king amongst bloggers comparing their earnings, but what exactly is RPM and what are they comparing?
Short for revenue per mille, RPM is the earnings accrued for every 1000 units (mille means thousand in Latin), and is the most commonly used measurement in online advertising. It’s the publisher side of CPM, or cost per milli. Advertisements cost advertisers money, hence they use CPM. They earn us revenue. Hence we use RPM.
The textbook definition sounds simple enough, but for such a key benchmarking metric, RPM can be far more complicated — and controversial — than this lets on. Why?
Because RPM as a unit on its own is ambiguous. Much like an inch or a centimeter, it’s just a unit of measurement. You can measure all sorts of things with length. Same goes with RPM. You can calculate it based on pageviews, impressions, sessions, uniques, etc.
You’re simply dividing your earnings by whatever you’re measuring it against and then multiplying by 1000.
Which of those units should you use, and why does it matter?
In early 2017, we began using sessions as our main metric to calculate overall RPM and compare relative monetization, believing the use of other popular method of pageviews had run its course in this regard — and others.
We even went so far as to declare that pageviews are dead (mostly for shock value and not literally, but inspired by a very real trend) when it comes to painting an accurate picture of website data.
The reason for this is simple: Sessions, on-site duration, bounce rate, pages per user and many other custom, site-specific factors offer a much more complete analysis of site performance.
Put another way, focusing on pageviews leads to bad user experiences. When Mediavine talks about RPM, we’re looking at the whole picture and with it, improved user experiences.
The true meaning, and value, of RPM
Let’s say you improve your site’s user experience by running fewer ads, optimizing your content and improving site speed as a result of joining forces with Mediavine over another company.
Suddenly your pages per user and average session duration increases, while your bounce rate declines. That’s great, but do you know what won’t improve? RPM, if calculated using pageviews.
This is because a second pageview is never as valuable to advertisers as the first.
All pageviews are not created equal, and as a result, using this singular statistic can provide skewed, incomplete and backwards-looking data when used to compare earnings.
Let’s say you increase pageviews per user by 20%, or to 1200 pageviews compared to 1000, while your sessions remain constant at 800. As a result, your total revenue increases 10%, from $10 to $11.
Note that the revenue didn’t increase 20% along with your pageviews, as advertisers pay more for that first impression and each subsequent page declines in value.
In this example, your initial Revenue / Pageviews * 1000 ($10 / 1000 * 1000) comes out to a $10 RPM if calculated using pageviews. Yet after you improved your site, and those numbers changed to $11 / 1200 * 1000 … you’re at a $9.16 RPM.
Wow, my RPM went down even as I got more traffic, you’re thinking? My new ad management company must be terrible! I miss the old guys that squeezed every penny out of my pageviews!
No you don’t. You love Mediavine. Here’s why:
Let’s look at what happens when using sessions to calculate RPM instead (same math, different focal point: Total Revenue / Sessions * 1000). Using the above example, the original RPM was $12.50 ($10 / 800 * 1000), and after our UX improvement, $13.75 ($11 / 800 * 1000)!
This is vastly oversimplified, but proves why Session RPM is the only real RPM.
The undeniable point is that user experience — getting your audience to spend more time on your site and come back the next time and the time after that — matters most in the end, and this is the only way to calculate RPM which reflects that.
Squeezing every penny out of each pageview and causing a user to never return is not the Mediavine way, and neither is focusing on misleading, outdated metrics that invite inaccurate comparisons while telling you not even half the story of a site’s value to advertisers.
We’d rather focus on better user experience and accurately reflecting overall site performance, and the RPM you see in your Mediavine dashboard is calculated accordingly.
As far as we’re concerned, this is the RPM that matters. So when you ask Mediavine what RPM is? It’s your earnings, divided by your sessions, times 1000.