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Feb 3, 2008

Converting CPC to eCPM

Two advertising models use different metrics for payment. Can they be compared on an equal basis? Yes

CPM ads pay based on dollars per thousand views. CPC ads pay a dollar amount only when a user clicks. If CTR is the click-through-rate, then the formula for computing the equivalent CPM is:

CPC x CTR x 1000 = eCPM

This is the same as:
Earnings / Impressions x 1000 = eCPM
Earnings = CPC x CTR x Impressions
CPC x CTR x 1000 = eCPM

Let's look at a few examples.

If an advertiser pays 10 cents per click; and your CTR is 1% (i.e. 1 of 100 viewers click), the eCPM is $1. (e.g. 1,000 x 1% x $0.10 = $1.00) This is already high for most bloggers.

If an advertiser pays $1.00 per click; but only 0.1% (i.e. 1 of 1,000 viewers click), the eCPM is still $1.00.

Thus, your best result is a high CPC, usually from an advertiser selling a high-ticket service or product like mortgages and cars; and a CTR from your audience for this product that is higher than normal.

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