What Is RPS & How Can It Drive Digital Growth for Publishers?
If you strip everything down to the core, a publisher’s business model is the acquisition and monetization of audience at price differentials. If the average cost of acquiring a reader is lower than the publication’s ability to monetize a reader, the publisher achieves profitability.
On the face of it, what I’m saying is simple, but in practice it’s fraught with a number of challenges. To begin with, as an industry we are obsessed with tracking the wrong metrics.
CPM is the Rosetta Stone metric for publishers and advertisers to trade. It’s great that we found a currency for both parties to transact, but it’s simply that: a currency. In reality, we have very different goals: Performance advertisers care about conversions (phone numbers, emails, and purchases). Digital publishers, on the other hand, should care about the value of their readers (and the monetary value they bring to a publication).
I’m not suggesting ignoring CPM as a metric – just that there’s a bigger story here and that an increase in CPM doesn’t necessarily equate to an increase in ad revenue.
Let’s say you test a new advertising demand partner. You log into their dashboard and see a super high CPM. Great, right? Not necessarily. If the ad partner is running aggressive ads, such as pop-unders or in-banner video with sound, then the user may bounce. Aside from the poor user experience and potential denigration of the brand, there’s also a monetary loss. The sum of all the ad revenue across the rest of the pages that the user would have looked at (had they not had a terrible user experience) is likely far greater than the small CPM boost received from running aggressive ads.
The Answer Is Revenue Per Session (RPS)
Publishers need a simple revenue metric that can easily measure the value of a reader. Enter Revenue Per Session (RPS). This refers to the total revenue from different monetization partners, like SSPs, for a session on the site. A "session," in case you’re wondering, is simply a website visit. The "session" accounts for multiple pageviews, for multiple ad impressions, and across multiple ecommerce purchases. The value of an entire session gives publishers the information needed to refine decisions and maximize profits per reader.
Don’t get us wrong – CPMs, Page Views Per Session, and Bounce Rates are all important metrics, but RPS encompasses them all. It’s the proverbial canary in the coal mine. If your RPS drops, then you should start to look deeper to find the cause. Here’s a quick formula to calculate RPS:
- (Number of ad impressions x bid value) / sessions = RPS
As the old adage goes, once you can measure it, you can manage it.
What Influences RPS, and How Can You Boost It?
User value can be influenced by hundreds of factors, but broadly speaking there are three main ways publishers can leverage RPS data to maximize profitability.
1. Bringing Higher Value Readers
If you can measure not just the time on site, or the page views per visit, but also exactly how much revenue each reader made, then you can make sure that the average cost of acquiring the readership is lower than the cost of monetizing it.
For example, if you know that a specific article is unprofitable on Facebook in the afternoon then you can adjust your bid settings to daypart the campaign. If you know that a specific OS or browser is unprofitable all the time then you can cut it and focus your efforts on amplifying what is profitable.
The RPS for each user is not static. It can vary by the quarter, month, day of the week, hour, minute, and second. The variance, or spread, is huge. Any good trader knows that whenever there is a massive spread, there is a massive opportunity to profit.
2. Driving Content Strategy
By tracking RPS at an article, author, and content category level, editors can measure revenue with near accurate precision across multiple dimensions. If publishers have the ability to track the content that is most profitable, they can adjust their content strategy – prioritizing topics that are more profitable and resonating with audiences. This can be done by analyzing data, noticing specific upticks in traffic and RPS.
3. Boosting Ad Placement Value through A/B Testing
Typically, the approach many publishers take when doing a redesign is to hire an expensive firm to design a website that looks more beautiful and more modern than the previous one. But is it more profitable?
Unless the changes are ruthlessly A/B tested the results can be random at best – and disastrous at worst. By testing each and every single element and measuring the RPS of the base as against the test variant, redesign becomes an iterative process where the ultimate outcome is a guaranteed boost in overall yield (if executed correctly).
For example, if advertiser performance metrics like viewability or ad click-through rates are positively impacted, the RPS can increase dramatically. The same is true of user engagement. Measuring at the RPS level captures all of this.
While RPS is important, it is only the first step. Once you’re able to put a value to a reader, the next goal is to increase their value. This can be accomplished by using analytics to curate content geared toward their preferences and adjusting ad strategies to provide more meaningful experiences that keep consumers coming to your platform. Focusing on RPS not only guides publishers toward greater profitability, but also allows them to optimize their advertisers’ spend through true measurement of an active and engaged audience.
Chris Ingham Brooke is the founder of Pub Ocean, a venture-backed technology company that makes digital publishing profitable. Pub Ocean's mission is to provide publishers with the toolkit to automate and simplify audience development and ad operations, ultimately creating better content and building more sustainable companies.