Noob question: CPM, eCPM, CTR - how exactly does it work?

Dear All,

I´m a developer who´s working on a messenger app for android. One of the things I´m still not done with is having advertisements displaying in it. I´ve been reading a bit about this, and while it´s very obvious that CPM means that you´re paid an amount of 0.20 - 7 USD per 1000 of something, it´s not obvious to me what the something is:

  1. Is it simply views, and an average based on how many people out of the 1000 are expected (0.75 % perhaps?) to click on an ad?
  2. Is it the amount you´ll earn per each 1000 that clicks on an ad?

Let´s say you have an app with 10000 daily users who all spend an average of 20 mins using the app. They get to see a new ad every 30 seconds, so there will be 40x30 = 1200 views per month per users x 10000 = a total of 12 mio views (/month).

In case 1, this would mean that the payment is 12000000 / 1000 * 7 USD (best paying ads used here) = 84000 USD earned in a month.
In case 2, if the CTR is 0,75 %, the payment would be 12000000 * 0.0075 = 90000 clickers / 1000 * 7 = 630 USD

What´s the right understanding of this, if any of the above?

Thanks in advance!

eCPM is the income you get from 1000 Impressions (ad views)
But keep in mind that usually networks mostly pay you based on Clicks or Installs and that eCPM value is calculated on average based on what you earn on 1000 impressions.

So in other words the definition in example no. 1 is right - except for that maybe 7 USD is a bit high and should rather be maybe 2 USD so that the earning for a month would be 24000 with 10000 active daily users who on average uses the app 20 mins pr day?


Yeah it’s only a measure of your traffic’s performance. It comes down to clicks/installs/type of ad/location of user/type of app/placement of ad units inside app/current campaigns/season/time of financial year(budgets) and other factors.

Yes, but again keep in mind that even 2 USD may be unrealistic value. It’s not because you read that typically eCPM ranges from 0.20 to 7 usd that you can assume your eCPM will be 2 usd.
If the ad views you planned to have involves only Banners Ads and your users are roughly evenly spread among all GEOs, your eCPM will be around 0.2-0.3 usd. If all the ad views are Interstitial Ads, it may be over 5-6 usd. If your users are mostly in USA or other Tier 1 countries the eCPM will be higher. On the other hand, if your users are from Tier 3 countries only, your eCPM will be lower.

Thank you for this everybody - I guess I´ll need to see how it goes when my app is ready to launch!