CPM stands for cost per one thousand impressions, or cost per "Mille," which is Latin for thousand. This metric is used by publishers to define and segment their audience and put a measurable value on it. eCPM is a different metric, used by advertisers to determine the "Effective cost per thousand impressions," or the revenue generated from a thousand impressions of a particular advertisement. eCPM is used as an ad performance metrics, while CPM is used as a reach and pricing metric.
The calculation for eCPM is "Total Earnings/Impressions x 1,000." This will tell you how much revenue you get per thousand people who view the ad. For example, if an ad produced $30 in revenue, after serving 50,000 impressions, the eCPM would be: 30/50,000 = .0006 x 1000 = .6. This means that the advertiser can roughly expect to make .60 on every 1,000 impressions of that advertisement they purchase.
Below is a sample of how CPM pricing is calculated. If an advertisement's price is $10 CPM with one million impressions, you would perform the following calculation: 1,000,000 impressions/1,000 (CPM) = 1,000 groups of 1,000 viewers. 1,000 groups of viewers x $10 each = $10,000. CPM is only able to put an estimated value on the audience, from a publisher's standpoint, and does not factor in revenue to the advertiser.
CPM is a metric that has been used for decades in the print publication world, and is also used to price online ad space. However, eCPM is a metric exclusively confined to the online advertising world. The technology required to track users from ad to purchase exists only online. The revenue obtained, a critical factor of eCPM, cannot be determined with print ads.
In theory, eCPM is a far superior metric than CPM, especially for direct response campaigns or to show returns on investment. However, there are other forms of advertising which spread brand awareness and do not necessarily offer an immediate opportunity to purchase an item. In these circumstances, it is best to use CPM.