Many of our Publishers (and we believe Publishers from all ad networks) mail us saying that the eCPM is varying a lot and ask if they could do anything to avoid that. This post addresses exactly that. Why does it vary? Can I stop it? Why can’t I have a steady upward sloping eCPM?
First things first, what exactly is the eCPM?
The CPM is, as many know, the “Cost per Mille”(from Latin, thousand) and it refers to the advertiser buying media on a specific channel, be it radio, TV, Adwords, RevMob or whatever other channel you can think of. It is the cost of showing something a thousand times. Basically you get the total cost divide by the number of hits and then divide by a thousand.
On the other hand the eCPM was a metric created in online media when CPC pricing started. It was a means of adjusting the CPC to a CPM basis, so it is CPC x CTR/1000.
Why does it vary?
These two metrics are and were designed to be used over long periods of time, like throughout the whole campaign and to compare prices before getting a campaign.
Because it is composed of a fraction and that varies in both terms, it’s oscillation seems very random and can go lower than you expected. Here is a graph of a random set of days in RevMob’s eCPM.
As you can see, if you take the whole period it stays inside a predictable interval. In the case of RevMob it may vary more than the usual CPC to eCPM metric because we show you the CPI to eCPM, thus the metric has more variables changing with unrelated patterns.
But note that the eCPM is used and meant to be used in big periods of time, so the small periods of time compensate each other with their random volatility and the picture of the whole is clearer. This is just like following the returns on a stock everyday. If the stock yields high returns, very likely it will have a high volatility. The eCPM doesn’t have a CAPM theory, but we can say it remains constant/similar across the board given that there are no technical issues.
This is Apple’s stock returns, daily
So, did it go up or down? It went up 3%, started at $459 and closed at $474
Can I stop it?
You probably have noticed that the impressions on your app are not that much predictable. Some dates, like Christmas, have a huge amount of impressions but on a regular day. Impressions is the main variable in determining the return of an ad unit.
Some publishers ask us if they can block low bidding advertisers from their ad units but that is not very revenue wise. It is usually the mindset of CPM media buying where the quality and conversion rates don’t really matter.
Think of it: you have a limited space to show two ads, one of them is paying well but converts badly, the other pays bad and converts well.
- I) If you only allow the well paying ad to compete, it will affect your conversion rate and thus the CTR, or in our case IR(install rate) is gonna drop, affecting the eCPM. In order for that kind of blocking to work you must have a ratio to compensate the quality of the ad.
Besides, if the advertiser knows he’s getting a high conversion rate, he can simply lower the bid to optimize his budget. So, blocking low paying ads may get you a higher average CPC, but a lower conversion rate(CTR). Add to that the fact that putting constraints on advertisers you can and probably will reduce your fill rate
- II) If you allow both to compete equally, your conversion rates are going to be good and the CPC won’t perform as well. At the same time, the advertiser who is bidding lower than you like is going to see that he’s not getting that much impressions because he’s losing most bids to higher bidding advertisers.
As he knows his ad is effective, and he wants to bring more users to his business, he will have the incentive of raising the bid to be shown more often. When he does that the eCPM of the whole network gets to go up
So, if you don’t block advertisers and let them compete freely, the network regulates itself by giving all advertisers predictive performance and known results. With that, they raise the budget.
Why can’t I have a steady upward sloping eCPM?
To have an upward sloping eCPM you must have an upward sloping bid on the advertisers’ side. For that you need results because they’ll only raise the bid if they see their impressions have a good conversion rate of users who later on spend money on their business.
Knowing that they have an efficient user acquisition pipeline with an Ad Network, they will try to push for more impressions which brings them to the bid competition with the other advertisers.
The more they have to compete for quality users the more they bid and the steeper the slope of your eCPM is. So the way to have that is by bringing quality users to the advertisers to make them hungry for more. One way to do that is by using the data about your app to better target the ads, so, the more meta-tags you use on your RevMob ad Units, the better it is for the advertisers to get users and they pay a premium for that: a higher eCPm.
Main take away
Use the eCPM wisely, use it in long periods of time or to normalize two networks you want to compare and the high-level goal the eCPM shows you is: How many quality users can you bring to an advertiser? Make sure your app is great and those users get find it, the monetization, let the ad networks do the heavy lifting