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In the last article in the series on standards I proposed a definition for a click. In this article I'll examine RPM (Revenue per Thousand visitors) and why the classic parking company RPM is actually a bad measurement how well a domain is performing.
 From the formula that derives RPM (Revenue / Visitors * 1000) we can see that there is an inherent problem. While revenue is known and clearly defined, visitors are not. I won't go through once again all of the strange and wonderful definitions of visitors (see a previous article) other than to indicate their impact on RPM.
For example, I hear many domain name owners comparing the RPM of one parking company to another. This is like comparing how many people step off an escalator per hour without knowing the speed of the escalator. A simple solution would be to ensure that the escalators are all running at the same speed. In a similar manner you must first normalize the parking company data so that you are effectively using the same metric for counting users.
A classic example is when you compare RPM rates for Domain Sponsor versus Sedo. Because Domain Sponsor counts users as an IP address every 24 hours they typically report a lower number of visitors as compared to Sedo that count users as a unique IP address every 18 hours. This means that Domain Sponsor immediately receives a boost to their RPM value due to a lower value for the denominator in the RPM formula.
This is not a scam or some sort of fraudulent activity on the part of either parking company but it is a clear example of what happens to a crucial metric when there is a lack of standards.
What most domain owners are pushed into is measuring domains on a revenue per day basis. The reason for this is simple, both time and revenue are measurable.
The danger with this measurement is that a portfolio could have falling traffic but rising earnings per click providing a sustainable revenue line in the short term. Without the traffic to sustain itself the portfolio is much more susceptible to the vagaries of advertisers and earnings per click. By measuring only revenue per day you won't have an appreciation for the risk side of your portfolio.
For example, leading up to Christmas a portfolio with falling traffic (eg due to expiring links) may have increased EPC due to heavier advertising expenditure. As soon as Christmas is over the EPC typically falls and normally traffic begins to rise (but not in this portfolio). Since the traffic is also falling then the overall revenue for the portfolio decreases dramatically in line with the falling EPC and traffic. If you were only measuring revenue per day then you would never pick this up until it was too late. You may have made a commitment based upon this revenue stream only to find yourself in hot water!
Measuring RPM is important as it incorporates traffic, revenue and inherently time as you always express RPM as a value at a point in time. The challenge for domain owners is ensuring that there is a comparison across parking companies. At ParkLogic we use a measurement we call PL RPM (ParkLogic RPM). We've normalized the traffic data so that we can then clearly compare one parking company to another.
Wiki: RPM, EPC, Domain Sponor, ParkLogic, Sedo
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