Tuesday, 9 January 2007

eCPM, the Evil Twins of AdWords and AdSense

The concept of eCPM continues to confuse both new and experienced AdSense publishers. As I explained in a previous post, for AdSense publishers, eCPM is merely a calcuation based on past performance that indicates how much you are earning per 1,000 page impressions and is calculated using the formula (earnings/impressions) * 1000.

However, to add to the confusion, the abbreviation "eCPM" is also used in the world of AdWords advertising but has both a different formula and a totally different purpose. As the AdWords Help Glossary states:

Effective CPM, or eCPM, is the effective cost per 1000 impressions generated by a cost-per-click ad. eCPM is determined by multiplying a number of factors, including the ad's cost per click (CPC) and its clickthrough rate (CTR). The resulting eCPM can be used to rank CPC ad campaigns against CPM campaigns.
Thus, in the world of AdWords, eCPM is a tool that effectively converts CPC (cost per click) figures into CPM equivalents for the purpose of determining the rank of regular CPC ads as compared to CPM AdWords ads. On the other hand, in the world of AdSense, eCPM is merely a reporting figure whose calculation converts CPC figures into their "effective" CPM equivalents but has no "active" purpose . . . for AdSense, nothing is determined by the value of eCPM but, on the contrary, AdSense's eCPM is determined by other data.

Thus, to summarize, Google uses the abbreviation eCPM in both AdWords and AdSense but in each instance the formula and the purpose is different. They are completely separate from each other and must not be confused one with the other. For AdWords, eCPM converts CPC figures into CPM equivalents, which determine the ranking of AdWords ads. In AdSense, eCPM is merely a passive reporting figure that results from converting historic CPC data into CPM equivalents.


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Anonymous said...

I am SOOOOO sick and tired of Angellica, Yuki and other "gurus" on the AdSense blog. It's rediculous. They are there just to make visitors go to their blogs. Sometimes I just want to tell them to shut up!

hueys_world said...

I am a bit confused about the logic of using Adwords for generating Adsense revenue. If I understand this correctly, I pay per click for words to get others to click on the ads on my site. Without knowing the true math behind it, I could be spending dollars to chase pennies. How you or are you using Adwords for your blogging business?

Ian F. said...

hueys_world, no I've never used AdWords to get traffic to a site in the hope of getting AdSense clicks and I don't think many people do it successfully, though some do, apparently. Google seems to be actively trying to stop people from doing just that too so it's not a method I would recommend.

In case you're not aware, it's often referred to as "Google Cash"