2 minutes reading time (490 words)

Part 1 - A History of RPM

20190916_rpm Getting a fuller understanding of RPM

In this series of articles, I plan on sharing my insights into RPM and how this metric has impacted all our lives in the domain industry over the last decade. I hope you enjoy the articles as much as I have writing them.

Escrow.com

For those of you that are unaware, RPM means Revenue Per Thousand Visitors. I find that very few people understand how this universally accepted measurement term is calculated and how it can vary from one provider to another. During the following articles I will be referring to how RPM has shaped the history of the domain industry….

Most people would be aware of the formula for a domain’s RPM looks like the one below:

Simplistic RPM formula

This looks simple enough until you begin to dig into it. The reality is that a sustainable market RPM formula it looks something more akin to the following:

Extended RPM Formula

I know that it looks really complicated and that some readers have already bailed but this equation is the one that many of us build our businesses upon. I hope you can hang in there just a little bit more so that we can see what all this mumbo jumbo means.

Essentially it says, more revenue is generated per thousand views if the views are humans and the advertiser demand is high. The funny little symbols at the front of each line just says to sum these values across time.

In reality we should break it down a LOT more by pulling out why advertisers pay the prices they pay per click. From a very simplistic perspective, for each market vertical advertisers should pay up to the level where they can generate sufficient profit from their advertising expenditure to remain sustainable.

This means we could say something like the following:

Formula for profitability

I've deliberated completely ignored conversions, website performance, advertising copy etc. and wrapped them all up with "Revenue Sales". From a definitional perspective, revenue from sales is how much the advertiser generates in each transaction and this can vary greatly depending upon the brand etc.

Expenses are what it takes to run the company, make the widgets and the PPC cost is the cost of advertising on Google (for this case). The revenue from sales and expenses is really what separates companies out from one another in the eyes of consumers while PPC cost is achieved via the open Google marketplace for traffic.

There are a few additional items in the RPM formula that requires further examination. G, the Google margin is combined with a Google tier margin with acts as a kind of rebate for those companies that achieve a level of traffic scale.

That's it for the maths lesson and article one in the series. The following articles are going to be telling a story about the domain industry and how RPM is the key to understanding what's going on.
 

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Comments

joezeppy on 24 September 2019
Show off! LOL

Hi Mike,

You're a show off but I mean this in the most positive way. I love this stuff. LOL

Hi Mike, You're a show off but I mean this in the most positive way. I love this stuff. LOL
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