A metric that affiliates do not talk about much is RPM. It's a relevant metric to look at when you access the value of the website before buying it.
I calculated our average, and go into greater detail as to why I like this metric. Enjoy!
What is RPM?
RPM is an acronym for Revenue Per Mille and means how much you're getting paid per 1000 impressions. The metric is commonly used by ad networks such as Adsense, Mediavine, or Ezoic.
The metric is easy to calculate:
RPM = (Earnings / Number of sessions) * 1000
The RPM of a site tells us a few things, how much of the pages are monetized, how good (or bad) of a job the owner has done at monetizing the site, and what the effects in earnings would roughly be if we were to increase our visitors.
If we can add 10,000 new visitors to a site with an RPM of $90 vs. 10,000 new visitors to a site with $40 RPM makes a huge difference in the increase of revenue.
Is RPM the perfect metric?
One thing you have to keep in mind is that rarely a single metric can tell you the whole story. And neither does RPM.
Let's say we've targeted really profitable and highly-priced keywords prior, achieved an RPM of $90. We now want to scale this.
The problem is, we've maxed out on high ticket items in our niche to review. And we're already ranking highly for the keywords.
Adding 10,000 new visitors to our informational content, or to affiliate posts with less-pricey products will surely help us increase revenue - but the RPM might dip, due to the aforementioned factors.
That doesn't mean it isn't worth adding the content (it might even be more worth it since it requires less of an investment), it's just that we cannot calculate the outcome in revenue based on an average RPM based on the current data.
However, if we want to get some sort of estimate - it's the best we can get.
Affiliate estimates usually are based on the following:
estimate revenue = search volume * click-through rate (CTR) average on target position * CTR from our website to affiliated website * conversion rate (CR) * average commission per order/lead
While the formula to calculate RPM is pretty straightforward, it's difficult to get an accurate number because of inaccuracies.
The long tail is huge in SEO (some data says it accounts for 70% of all searches).
If we base our estimates on the search volume of a single keyword and end up ranking for tens of thousands of keywords it's pretty clear our estimation will be waaaaay off.
If we were to aggregate all these keywords (which isn't really possible before we got the data in Google Search Console), we'd still have a pretty hard time since we'd have to say that'd hit the target position on ALL those keywords - which just isn't possible.
In most scenarios, RPM is the superior metric for affiliates to calculate estimates with.
Now that you are familiar with the term, what the cons are, and why you should be using it.
Average RPM on Our Portfolio
Richard Patey asked me this brilliant question:
What is the average RPM on your portfolio?
I admitted I hadn't calculated that, but thought it was such a great metric to show the potential of a website.
Getting traffic is getting more and more complex, and the competition is getting stronger. We should focus on getting the most money possible out of every visitor we get.
What I've done is aggregated the revenue and sessions on a portfolio-wide level, and multiplied that by 1000.
The result... *drum roll*:
An RPM of $63.25
This to me is quite low, that's 6.3 cents per visitor.
We, or our buyers, surely have an upside we haven't experimented with yet - ad networks and CRO.
I believe this gives us an ever stronger selling-point (a CRO expert could probably make a good amount buying and flipping one of our websites).
However, $63.25 is not bad if you put it in the perspective of what Adsense can provide, an RPM of $60+ is rare in the world of ad networks (unless you're in a highly competitive niche).
Some things to keep in mind with this data:
Not all our websites are built out and ranking. Some are fresh and therefore, require more work and age until they start making money.
I picked January as the month to collect data, and January is known to be one of the worst months conversion-wise. However, basing it on Q4 stats wouldn't make it fair, and now with the outbreak of corona (stay safe everyone!), we will probably see an effect in earnings. So I picked January, which means we probably get an average that is on the lower end.
Anyways, that's it for this post. I hope you found it interesting. Special thanks to Richard Patey for the idea of this blog post. If you want to read about what conversation sparked me to write this post, subscribe to Patey Premium.
Let me know in the comments below what your RPM is on your portfolio, or if you have a better metric that most seem to overlook!