CPM in the doghouse

By October 16, 2009Advertising, WAYN

image As you may have seen, display advertising was the only part of the online mix to show negative growth in the UK in H1 this year (negative 5.2% as per the IAB).  I think there are lots of reasons for that, not least the economy and growing questions over how much value gets delivered, but an important factor is the obsession with CPM as the measurement tool.

A couple of weeks ago Shellie Bonnie wrote a popular guest post on Techcrunch: Let’s Kill The CPM addressing precisely this issue.  The full post is well worth a read, but for those of you who like a quick summary his main arguments are:

  • Counting impressions is the wrong way to measure the effectiveness of ad campaigns and dissuades people from being creative
  • Publishers deliver what they are paid for – page views – but in reality low quality top 10 lists, and photo galleries don’t do much for the consumer or the advertiser
  • Inventory is limitless and we see so many ads that very few stand out
  • Pay for performance (CPA and CPC) is not the answer.  It has its time and place but that is limited to situations where people know what they want and are close to buying.

All great points, and behind it all lies the fact that the much vaunted measurability of internet advertising is something of a red herring.  It is true that for certain classes of advertising it is possible to track the user and understand the effectiveness of your ad spend more effectively than was possible offline (mostly), and that part of the market should continue to trend towards CPA and CPC, but for the rest it isn’t sensible to be looking for immediate correlations with transactions.  It is more akin to brand advertising, e.g. sponsoring Wimbledon or the Superbowl.  Understanding how many people have been exposed to a message remains part of the story, but needs to be weighed alongside other factors including quality of impression and engagement.

As an example of this, for the past year WAYN has been selling packages to tourist boards which combine all of these elements – quality impressions via home page takeovers and default skins, engagement via competitions and chat rooms, measurement from a combination of impressions on WAYN, engagement metrics (quantitative and qualitative) and traffic out to the client’s site.

This is also part of a shift that Fred Wilson has started describing as a transition from paid media to earned media.  A good part of the scepticism over the value delivered by display comes from the growing hostility to being on the end of broadcast messages.  Brands’ alternative way of getting their message across is to get people talking about them voluntarily by doing cool things with and for their customers – event sponsorships, competitions, forum participation, social media engagement and so on.  This is one of the reasons the tourist boards like WAYN.

The upshot of this is that brands will divert budgets from buying media to many different kinds of participation.  By this logic CPM will remain in the doghouse for a long time to come and brand advertising might be the next market to get shrunk by the internet.

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  • The WAYN example sounds excellent. Is the pricing based on a relatively complex calculation of impressions*engagement*clicks or something of the kind? If so, that really is brilliant but I also wonder how much of WAYN's revenue comes from such campaigns. I suspect that this approach will only work for a modest proportion of campaigns with very large publishers, where the approach is more akin to sponsorship than advertising. The WAYN example seems to fit with this but I'm guessing from the limited details.

  • I can't divulge too much, but the pricing is pitched at the package level and doesn't have an algorithmic base. The targets are agreed separately.

  • Thank you for the reply: that's interesting detail already. That sounds like a sophisticated CPM… anyway, I appreciate the confidentiality aspect so it's difficult to get into a full discussion.

    Tangentially, it's interesting that DFJ Esprit is backing an ad-revenue business model. Perhaps it pre-dates ad businesses going 'out of fashion'.

  • Max

    Hey Nic – I have a t-shirt I think you'll like 🙂 http://videoeggdesigner.spreadshirt.com/friends

  • 🙂 Exactly Max, exactly.

  • 🙂 Exactly Max, exactly.