There are a lot of metrics you can calculate to help understand how your ads are performing and what areas are worth optimizing. However, one metric rules them all and that’s RPM, or Revenue Per 1000 Pageviews.
There are two ways to increase revenue for a content-oriented website. You can get more pageviews or you can get more money for the pageviews you already have. Every optimization falls under one of these two categories.
So how do you calculate RPM? It’s super easy!
First, decide on a date range. Let’s say it’s the last 30 days.
Second, determine the number of pageviews. You can get this number from Google Analytics. If, for some insane reason, you don’t have Google Analytics, install it immediately and come back in a few days.
Third, determine the total revenue. This step is a little trickier. Let’s say you work with 3 ad networks, have 1 direct deal, and have revenue from affiliate sales (ex. from linking to products on Amazon). You will need to login to each platform and get the revenue for last 30 days. Sum all these numbers to arrive at a grand total.**
Finally apply this formula to calculate revenue per thousand pageviews (RPM).
RPM = 1000 * (Revenue / Pageviews)
Calculate this number monthly or more often to make sure your site remains on track.
Here’s an example:
Pageviews: 500,000 Network A: $400 Network B: $200 Network C: $300 Direct Campaigns: $200 Affiliate Revenue: $50
Calculate the grand total: $1150
Now apply the formula:
1000 * $1150 / 500,000 = $2.30
For every 1000 pageviews, you earned $2.30. So what do you do with this information?
RPM is useful as a high level metric. It tells you if your overall strategy is working. If RPM is increasing, you’re in good shape. Just remember that advertising is like every other business. There are trends and seasons and the people buying ads on your website likely adhere to quarterly budgets. Lots of money gets spent in Q4 and budgets tighten in Q1. Measuring RPM daily can make you overly sensitive to short term fluctuations!
As a page level metric, RPM isn’t directly useful for optimization. It doesn’t tell you whether your pricing is correct on individual ads. Here you will want to look at fill rates, discrepancies, eCPM and rCPM instead.
** You might want to keep affiliate revenue separate when calculating RPM. It’s really a matter of preference and you can decide what’s most appropriate for your own site. One solution is to compute RPM twice, once for overall revenue and once for display advertising only. Note that you will want to include revenue from directly sold campaigns in your RPM calculation, otherwise you will see a big drop whenever you have a direct sale simply because there will be fewer dollars from remnant campaigns at those times.