Editor’s note: This guest post is written by Shelby Bonnie, the CEO of Whiskey Media. He co-founded CNET in 1993 and was the Chairman and CEO from 2000 to 2006. He served as Chairman of the IAB from 2001 to 2003. Whiskey Media is a content platform with three sites, giantbomb.com, comicvine.com, and animevice.com lots more to come.
OK, Advertising Week just ended… does anyone else feel like the online advertising industry is the orchestra, playing on while the Titanic is sinking?
We have a problem, folks. And I, for one, think we should start to fix it by killing off the CPM, once and for all.
I have been in the Internet media space for 16 years and will start by stating the obvious: The CPM has done more to stunt innovation and drag down quality products than any single thing on the Internet. Maybe it works in other mediums, but it sure as hell doesn’t work on the Internet. Having been both a small and big publisher (now small again), it’s been my experience that the collective focus on CPMs and counting eyeballs by marketers, agencies, and publishers has led to a whole mess of unintended consequences that have produced a series of “solutions” that work for none of those parties. And perhaps more importantly, it’s been terrible for users.
All campaigns start with the best of intentions: “let’s do something creative, engaging, and unique!” But unless someone really senior from the agency or client side intervenes, the road for a campaign always leads to the media buyer and the dreaded spreadsheet, where the two most important columns are impressions and cost. Ironically, there’s usually some good stuff in campaigns, but they are thrown in for free as “value adds.” At some point, publishers decide that if all clients care about is impressions, then OK, we’ll give them impressions. The output is an industry that overproduces shallow, superficial, commoditized impressions. Why do we have so many bad sites that republish the same junky content–content that’s often made by machines or $1-per-post contractors? Why do sites intentionally try to get us to turn lots of pages with tons of top 10 lists, photo galleries, or single-paragraph summaries of someone else’s story?
In 2002, my first full year as Chairman of the IAB, we made a decision as an industry to kill the original small banner (468×60). Though it was the only unit that many of our partners accepted, if we didn’t kill it, the industry would have had a very difficult time moving past it. We had to be bold and take some risk, but at that time we ushered in the move towards larger ad units, a move that all agree was a big improvement. We are at a similar point today. The focus on CPM is causing a bunch of behavior that is bad for publishers, marketers, and users. Only by killing it do we have the opportunity to invent our new future.
Why is the CPM such a problem?
- You always get what you pay for. I believe in basic economics. If you pay for impressions, you get impressions. Is that, in the end, what marketers really want? How about engagement? How about impact? How about actually selling product? A glut of impressions has helped no one.
- All impressions are not created equally. There’s a big difference between seeing an ad on a page of content that contains one uninteresting paragraph and twelve ads, and seeing a single ad on a page that is relevant to the ad and covers a topic for which the user is highly passionate and engaged. The differences between social network and content inventory is another example–how do you put those items on the same spreadsheet?
- There is no natural constraint . TV, print, and radio can only put so many ads within their product. But on the Internet, that is not the case. We can continually increase the number of ads per page or manipulate users’ behavior to goose our impression numbers. Can’t you see some publisher saying “if they just want impressions, why don’t we go from four ads on a page to eight” or “couldn’t we turn a new ad every time someone loaded up a new e-mail?”
- It doesn’t mean anything anymore. With such a glut of impressions from all media and the number of impressions with which people are bombarded with every day, it just doesn’t matter anymore. It’s an arcane notion that’s a holdover from a time when there wasn’t as much media. As I said, TV, radio, and print had natural constraints and there was a lot less of it. So just seeing an ad was, by definition, unique and impactful. Those days are no longer.
- Senior marketers get it, but there is a whole infrastructure built around the CPM. The process is built up around how ads are bought and sold, based around a media plan, and asked for in RFPs. All the good, creative thoughts get boiled down into spreadsheets, that are for the most part owned by folks that are not that far removed from their last college class. Even senior folks have to try to fight their own system to keep the ideas that they like.
- This is not a win for marketers. In a world of over-produced impressions, even great work by marketers is ignored at best and more commonly not even seen.
- The ultimate losers are the users. They get a lot of bad content and bad ads. They are literally overrun by ads all day.
What will a new solution need?
- Simple. In the end, I realize that to make the business of marketing work it can’t all be art. You have to have a way to create a streamlined process. Everyone wants and needs a way to compare campaigns and metrics to determine success. Simplicity can lead to scalability, which allows for more efficiency for publishers, agencies, and marketers. Having said that, the simplicity we now have has led to a model that doesn’t work.
- The metrics should be more closely aligned with what you want. Whatever you pay for is what publishers will start mass producing. If you want engagement, pay for engagement. It is unclear whether there is one metric or many. A starting point might be to start with uniques, actions (like sharing, contributing, and engaging), and time.
What about the CPA or CPC?
- CPA and CPC have their appropriate time and place, but let’s recognize that those situations are limited. Yes, they work great when people know exactly what they are looking for, but how do you convince them to buy something they don’t know they need? Pure click performance just emphasizes the status quo of what I already know and already buy. Yes, it’s an action… but so is a video view, a wiki contribution, a contest sign up, a tweet about a product, and so on. We also know that a singular focus on these items would create as crazy a set of unintended consequences as we’re currently dealing with today.
Where do we start?
- First, just stop using the CPM. Yes, it will break every model and process that the industry holds dear, but we need to get rid of the crutch. The ensuing turmoil will bring creative thinking, new ideas, and entrepreneurial passion.
- Let it be a movement, not a task force or sub-committee. Create room and dollars for entrepreneurs to experiment and try new things. They all might not work, but we will collectively learn. A bunch of task forces by industry associations will only make it worse.
- Think open source. This should not be proprietary or an individual company’s technology, it needs to be an effort on everyone’s part to do this together with the benefit accruing to us all.
- Realize that we all share a common need to fix this. The fight is with the system, not each other.
I certainly don’t have all the answers myself, but as a veteran of this space and someone who deeply cares about the medium, it is about time we all make a concerted effort to change our direction. I would love to hear your thoughts (shelbyb [at] whiskeymedia [dot] com).
Photo credit: Flickr/SuperFantastic
Appreciate the thoughts. We run an educational site and are struggling with ways to minimize/cut advertising by relying primarily upon premium services for revenue. Advertising is often anathema in educational circles, so we are particularly motivated to figure this out.
“if they just want impressions, why don’t we go from four ads on a page to eight”
Techcrunch, is this you???
No Tech Crunch would be from 8 to 15!
Can you really kill the CPM without something to replace it with first?
Yeah – I’m quite surprised he went through the effort of such a well articulated position and then offered no solution other than “stop using it”
dont kill bill boards hoardings, nor tv commercials. google robbed off visual aesthetics from web.
we indeed like static graphics, and dont mind it dance onClick or onMouseOver.
Have you explored social media? I realize there’s a time investment, so I wouldn’t call it free, but you can get a lot out of word of mouth and social media.
Thanks for the photos…
I totally agree CPM is a dinosaur, but it is the only dinosaur we can use as a measuring stick. The Internet ‘click’ does not ask age, income or gender.
How else can we guage effectiveness?
Bean counters obsessed with what they can measure need to get a clue. What matters is RESULTS (conversions) and the most important factor in driving results is RELEVANCE!
You should link directly to Cost Per Impression. I for one didn’t know which CPM this article was referring to at first.
http://en.wikip..._Per_Impression
But maybe I’m just simple that way.
to be fair to the author, i think cpm is a well understood term.
Will,
Not meaning to be argumentative, but I agree with Francois. It’s not difficult to hyperlink an acronym to a definition like somewhere, and given the vast number of acronyms we are faced with everyday, it’s not so likely that everyone will be familiar acronyms used in a particular article. It would help the audience in general gain a better appreciation for the content of the article if they understand the terms in use.
Shelby,
Great article. I couldn’t agree more. Our magazine has been in publication since 1994 and today, everything is CPM, CPM, CPM, whether it be for online or print ads. As a niche legal publication, we have a fairly defined (and small) market so CPM shouldn’t be the end all be all for ad decisions/budgets.
Ugh, I disagree here in every way.
The internet has given us so many confusing metrics to evaluate “real time” how advertising brings in sales, but those metrics are ALL false.
You can not put a price on advertising and get a realistic understanding of what that advertising does. If you’re a tiny outfit selling a niche product, I believe that advertising conversion metrics is an easy-to-understand value.
But if you’re a large-to-huge company, how do you really judge how your repeated advertising costs not just bring in fast sales but also bring you a reputation for the long run through impressions in people’s eyes? Does a Chevy commercial really sell a car? Of course not — not often, at least. Does a Microsoft ad have people running out to purchase a program? Probably only rarely.
Advertisers know they need a budget for advertising, just for reputation purposes. Advertising works. CPM is just fine for this purpose, and I would say that for large advertisers, CPM is way more important long-term than CPA or CPC. I hate CPA because it is unrealistic except for niche items you’re selling to a niche crowd and hopefully you’re timing your article for exactly when the customer wants to make a purchase. It’s not a realistic way to provide income when you have a consistent crowd (think: Quantcast statistics) over a consistent period of time.
I hope Shelby won’t mind if I jump in here for a minute – and I hope he will reply as well as I am VERY interested in what else he has to say on the points you bring up.
Let me introduce a larger perspective on why CPM is such an issue online. It encourages the greedy to continually increase opportunities to sell worthless impressions.
THAT is one of the major failings of the current Google AdWords system. Where once it was the advertiser’s greatest asset today it swings widely between quality impressions that convert at a consistent rate and garbage traffic that doesn’t convert at all.
Advertising MUST focus on what is best for ALL parties involved if it wants to be a stable business. You can’t gouge your advertisers by selling them junk advertising impressions. You can’t continue to bury the public in what we will continue to learn to tune out.
All wise decisions must be SUSTAINABLE and increase credibility – not kill it!
Advertising must sell RELEVANT ad space in a way that consumers are interested in viewing so that businesses can generate a positive return on their ad spend.
The opportunities are HUGE for Social Networking Media and individual publishers to offer HIGHLY relevant ad space so that readers WANT to see those ads because they are interested in what they offer.
I wrote about that some time ago hoping that one of the major Social Networking sites would pick up on the idea. StumbleUpon came closest to having the content optimized for relevant advertising that WILL convert extremely well. I’ve linked that post to this comment so those who are interested can better understand what I know from experience DOES work.
Sounds to me like the core of the issue are greedy publishers who use small ad sizes that allows them to slam 20 ads on the same page = very useless. Versus publishers who can identify their audience and present their inventory to advertisers who are interested in that demographic.
Maybe advertisers should be more careful whom they allow to plan their budgets, and how familiar those entrusted with the task are with their network and publishing inventory?
To me it is amazing how many people I meet in the industry who are only glorified sales people pitching the product and creating personable relationships with their to be clients, without knowing the ins and the outs of the product. In this case out product is intangible and can only be partially measured for success.
My point is that we are still pioneering a bigger field than we are capable of controlling at this time. The only thing we can do is to advance with care for our business relationships, clients, business partners, and share as much information as we can without bias for personal gain and grow as an industry. We are going to be the top advertising stream by 2013, instead of the #5 spot we hold today!
I agree. There’s tons of ads that have visual value, and many that I’ve actually enjoyed watching/playing that I remember to this day, without clicking on any of them. Apple, Anheuser Busch, Orbitz and others know what’s up.
I also think this completely misses the mark and confuses issues.
There are major problems with online advertising, but CPM is not a broken model in all cases. In fact the counter argument can be made that the glut of metrics, obsession with engagement and conversion has killed branding. A major component of advertising has always been to build brand recognition.
The result of this type of thinking is ad production companies convincing clients to build brand specific content sites which are both a huge waste of resources (what would you rather read a toyota magazine or a car magazine or even a general lifestyle one?) and short changing publishers who are the ones that have a real audience.
“In fact the counter argument can be made that the glut of metrics, obsession with engagement and conversion has killed branding.”
-1
What is the end goal of building brand awareness? Sales. It’s the brand purists that sometimes forget that practically every brand out there is in the game to convert sales and generate revenues.
Awesome post. Having worked with a PR/ad agency, I can testify personally to how the CPM approach limits creativity. The key problem is that managers have the equation stuck in their head: CPM = ROI. But it’s not that simple, especially when you add social media engagement to an outreach campaign.
At Harris Social Media we are tightly focused on aligning metrics with core business goals. In particular, we are looking at ways to measure brand equity independent from conversions or impressions. When we have a robust model of brand equity we will be better positioned to measure the ROI of long-term social media strategies.
CPM = ?
cost per thousand impressions. e.g. $10 CPM means advertiser will pay $10 for every 1,000 impressions of their ad
http://lmgtfy.com/?q=cpm
This is an argument I have been making since 2004/5, CPM is flawed in many ways.
Pricing can only go down
CPM as a model from a providers point of view is just a downward spiral. As you say eyeballs for eyeballs, if someone else can generate the same eyeball cheaper you’re done. There is very little game theory going on (to hold prices up) as the supply is virtual endless.
Infinite Supply
There is a seemingly infinite supply of impressions and relatively to a client it may as well be infinite. This does little to establish value and thus drives down the price.
Tiered Pricing
The split between Premium and Standard advertising is still ill defined. Premium is simply a website locked into a network that demands a fixed price (even as we have seen they will drop the price) and standard can be anyone.
How could you create price discrimination here:
– Brand recognition
– Ratio of content to advertising (analyse pixel count)
– Driven by continual surveying
– Integrated Behavioural Advertising, send the impression at the right time (ie 2 sites after visiting TechCrunch). Again probably still too big of an ask till there is an international industry body.
Impact of an eyeball
When we are talking CPMS I like to compare it to a billboard, sometimes you have a read, often you won’t notice it for months and some days 1000 people drive past others 500. You don’t know anything about them, what their intent is (ie going to work vs going shopping) etc etc. An eyeball at certain times of the day should be more valuable than at others.
Need I continue? I think the point has been made. What can be done?
1) Greater technology around differentiating websites and their visitors. By automating this you can provide an impact score. (that’s if we want to keep it).
2) Kill the metric, move on
A swap to CPA, Cost Per Action provides a better baseline for improvement. In my experience this is heeded by:
1) Lack of definition around actions
2) Actual implementation of measuring actions
3) Benchmarks. Small business doesn’t know this stuff or has the capability to measure it. Large enterprise is a different story.
Like the prod, time to knock CPM on it’s head.
BUZZ. Try again.
“Pricing can only go down.” How can you even say this if you can’t qualify what the product or service you’re pricing is?
Pricing for generic views on a generic page with generic user metrics will likely go down and down and down — more people are writing crap on websites that have nothing but crap with no return user information. High supply of crap, low demand from advertisers = falling prices. I’d agree there, completely.
And, yet, we’re still in a relatively new market. In terms of the REAL supply of accurate, informational and even profitable (for the reader) information, there’s still an entire market waiting to shake itself out. Advertisers WILL and DO pay more for viable user information — Facebook ads prove this time and again (prices in the markets I advertise in have been going UP, not down!). CTR isn’t as important as it was because you can also gain impressive value just by creating an advertising campaign that gets people talking about the campaign. How do you value that?
I’d say that CPM rates in some markets will go up. I’ve seen that cases repeatedly, even in a market where advertising dollars en masse are falling. Just because an entire market is falling in prices doesn’t mean that some parts of that market aren’t increasing in prices.
CPM rates will not go up. As a market expands and supply outruns demand price drops. Umm basic economics.
On the other hand there was a bottom limit of what you could buy a 60 second ad for, and there is no bottom limit for CPM, since generally speaking the site does not control the pricing. That’s under near monopoly control of Google.
But let’s rip the real problem with what you are saying. 20 years is not a new market.
It’s mature, it needs to be changed.
Wake up and Smell the Coffee…
Your argument is invalid. When you pay for a billboard you don’t pay for views, you pay for the site for a certain duration. It’s the same on the web excepts that days are replaced by CPM.
Actually the cost of a billboard does depend upon traffic — an ad in Times Square will cost much more than a billboard ad placed on a road in the middle of nowhere. So when you purchase time on a billboard you are paying for views.
@ Glenn
CPM = Cost Per Thousand impressions
There is supposed to be some innovation in this area now that Adobe has acquired Omniture, especially in monetizing video content.
Thanks for the quick left turn out of the traffic mainstream. People will forever gravitate to what they know, even when its not working anymore. We all regularly need a swift kick in the rear to get us out of the repetitive grove we dig.
I recently ranted about the lack of understanding of social media and measurement on my personal blog and touched upon the importance of the engagement metrics you mention. But as you know changing the process of the media planners and buyers is very difficult and will take a long time…especially when it makes it initially more difficult to compare campaign performance. However, there needs to be a transition to get to what you suggest (which I believe you are right about).
What if there were some method to equate a value assessment of an action (share, RT, etc.) that can be equated to an impression? One share equals 10 impressions (or whatever). Then add a couple new measurements (engagement, brand equity??) which those actions contribute. Just thinking out loud here…your article made me do it
Shelby, what you’re saying is that we need a simple solution to this “problem” of CPM, but discount CPC and CPA as possible solutions–we need something new, you’re saying. Ok, what about a combination of CPM and CPA? That way, the ad network or who ever owns the distribution channel has an incentive to deliver quality, targeted Ads, while at the same time they are able to reap some of value provided for placing ads in front of prospects. Your thoughts?
If this isn’t a possible solution, then what do you propose? I mean you seem to be arguing against using anything that’s standard to ad networks these days (CPM, CPC, CPA). I get that you want spur innovative thinking on this subject but how “creative” can one get when it comes to the pricing model for ads?
“what about a combination of CPM and CPA?” -> this is “click through” at Googlephere
.. what?
CPM goes nowhere.
Advertisers should name CPA and Adnetworks place those ads to maximize return for publishers (click through rate x CPA) and all happy.
Is not that how AdSense works? Why can’t be applied to banners and as a standard in the Internet where everything is measured and can be automaticly optimized on the go?
CPA works on google because people are searching for products specific to the ads, that will not work for a lot of other types of sites (social media, content).
There is no one size fits all solution, CPA is great for google, doesn’t mean it’s great for everyone.
I agree with the article 100% however I can’t help but notice how many ad units are on this page!!!
Just differentiate b/w the content writer & the content publisher.
The publisher is stuck in the CPM/CPA world as it is now, trying to cover costs & make a return in an ever increasing universe of sites & pages.
The writer is spreading his content/meme, in this case a reformer meme.
Two parties produced this page, but that don’t mean they are of the same mind.
the fact that the ads are there doesn’t mean tc is sticking to CPI as opposed to CPC/CPA (are you?)
First: Everything he says is true. But!
There is no other way to sell ad views than views.
Whether flawed or not there isnt a proposed solution in his rant and the measurement of results is the basis of valuing advertising.
CPC CPA CP_ doesnt matter. All that matters is that the advertiser FEELS that they get what they want.
Great article. Whether you agree or not, Shelby makes some tremendously interesting points. Regardless of whether CPM advertising should be KILLED I think at the minimum, innovation for NEW types of web advertising that are more engaging are badly needed.
I think the real fact that needs to be stated is that display advertising of any kind is not as effective as previously thought.
Back when people were buying print, they knew the circulation they were hitting but really had no metric for seeing how many were looking at their ad or making a call to action on their ad.
Now its very obvious who has seen it and if they are interested enough to click through to view more information.
The numbers from the click through rates cannot be pleasing to anyone but I think this is just an eye opener of what they have always been getting.
And how about television ads since the advent of DVRs and TIVO. Nobody is even watching the ads anymore.
So today’s marketers are going to be more sophisticated and most likely more conservative about what they purchase and I am not sure this is good for the advertising game in general.
Advertising as we know it has to change and it is definately going to take some creative people if it gets led to a different level.
The problem is. That if you continually see that McDonald ad you eventually are going to think about McDonald, even if you never clicked it online.
So measurement doesn’t fully measure what an advertiser gets. I honestly would love to pay zero for impressions and only pay you for a click, because what I will do is stop running the ad when the clicks start creeping up. Because then I will know that my branding exercise worked. You see what I mean? I think publishers are getting gamed. BIG time gamed. Especially when you consider that some of the middlemen in this equation don’t own up to what cut they are taking…
Wake up and Smell the Coffee…
Worst part about CPM, the self-refreshing page (more pageviews!). Good Lord A’mighty. Present company excepted, I love all the constant refreshing here.
I always prefer CPC to CPM, however if I am working with a client that has an online advertising budget in the 5 digit realm I try to push monthly sponsorship programs on websites that meet their target demographic. Banner ads are prooving to be more and more ineffective as people simply “tune out” this form of advertising. Advertising with rich media, particularly pre or mid roll in video ads has the largest amount of effect.
I discuss many of these issues on my blog at http://blog.tonangi.com
Excellent Article. It is however a little ironic to count no less then 14 CPM based ads on the techcrunch page that contains your article!
At my company PracticeFusion.com we are focused on giving advertisers CPM opportunities that target the ads directly at the user segments they want. We do this by understanding our users demographics: Doctors and Nurse Practitioners, their specializations, geographic area, etc… and the further by understanding the patients that they are treating. With this data we are able to display ads that are extremely relevant to decision maker (the doctors and patients).
The next step for us will be able to provide information back to our advertisers that help them understand the effectiveness of the ads displayed.
The overall industry use of CPM does get in the way of advertisers ability to understand the value of targeting. It’s incumbent on us as publishers to make sure that we continue to push our products to offer more and more metrics around effective targeting instead of just more and more impressions.
I agree entirely!! CP/M was an excellent operating system for it’s day, but those days have long gone.
I’m surprised the author didn’t mention the lack of hardware support for CP/M on current systems, nor the lack of a graphical interface, as it seems that these two points alone would make the argument – without ranting on about a number of terms and concepts which seem to have little to do with computer operating systems such as CP/M.
CP/M is dead – Linux or Windows are without a doubt the way forward!!
Excellent Article!
The problem is not the metric as such. Smart advertisers already have their cost per action, cost per acquisition and so on. They optimize media buys based on their own metrics, CPM serves only as the lowest common denominator from which all other costs-per are calculated.
There are many dimensions to display advertising, many more than for search. Technology should be key to managing this complexity. Publishers should show some accountability over display campaigns, but most of them simply can’t — they all use decaying 15 year old ad serving technology.
@Vlad, which ad serving technology is new and fresh, and why?
It’s a fun, sensationalistic blog post, but you’re confusing the fact that CPM is a RATE type, not a MEASUREMENT!
Smart marketers set specific measurements they need to meet/exceed for their campaigns, and negotiate the rate on that basis. Whether the campaign works or not is subject to all the factors you describe above, but NOT because the rate type is CPM. Cost/value analysis can and should happen regardless of how the campaign is being billed.
It’s in the area of measurements where innovation must happen, and indeed it is happening. But eliminating CPM as a rate type will not fix the problems you describe.
Jordan, you nailed it.
Very true. CPMs are increasingly becoming an exchange rate often representing the sum value of the entire campaign execution.
I agree. CPM is still a factor that needs to be reviewed when forming a campaign, it must not be killed but what must be is the perception of senior people of internet is all about impressions.
We all have to explain to clients that internet is way far different from what the traditional tri-media they grew up with. Internet should not be reviewed like the tri-media’s viewership (like TV), listenership (radio) and readership (print) which are all synonymous to them for internet as impressions. Unlike tri-media who are one way ad communication, Internet is all about interacting with consumers and engaging them with the brand’s “creative” communication.
This is exactly the problem, Jordan. And it gets worse. We’re now regularly seeing “CPM” campaigns with performance clauses and 24-hour outs. This, of course, is really a CPA campaign in CPM’s clothing, and completely discounts any value that CPM might have been providing originally. Flat-rate sponsorships make more sense, but there needs to be a way to set and justify those rates (media buyers need to be able to convince their superiors/clients that the spend is worthwhile). CPA/Conversions are NOT the way to go, because they discount those that happen after the fact, and completely exclude any brand lift from the equation.
It’s a problem that needs fixing, but everyone — including the buyers — needs to stop being lazy and just going with the CPM. Very frustrating.
Exactly right, Jordan.
Nobody should seriously be claiming that the CPM is a measure of effectiveness. It’s simply a rate card metric with which to price the delivery of ad impressions. And, after all, isn’t it kind of important to know, in assembling a media plan, how many people were reached with an ad message and how often?
When it comes to measuring advertising effectiveness, advertisers need to evaluate their campaigns by measuring the degree to which they achieved their financial objectives — which is to say, were enough incremental sales and profit generated by the advertising to more than cover the cost of the campaign?
There is no magical metric to use upfront to price advertising based on its expected effectiveness. You certainly can’t use the click — not with click rates at 0.1% and dropping. And it’s been shown beyond a shadow of doubt that non-clicked ads have value.
Lord knows what “engagement” means. That term keeps getting thrown around with no one able to either define it or relate it to advertising effectiveness.
No, it all comes back to using reach and frequency to price and plan, But then the hard work begins. Measuring the holistic impact of advertising — whether online or in traditional media — is mandatory but has never been, and never will be, easy.
CPM is indeed a way to measure both cost and effectiveness of ad campaign, More impressions shows that adv is effective.
Shelby is right in what he demands from entrepreneurs.
CPM might be good for branding but it is not a good indicator of direct engagement.
But if there are several ads per page then even branding might not be achieved.. it just pollutes the complicates the reading experience.
Jordan, I agree 100%. CPM is how the space is sold. Period. If the ads show in irrelevant spaces or if your website sucks, you probably won’t convert anyway. How does changing the pricing model change the imperative of having relevant traffic go to a high performing website?
So, let’s say your website does not suck and you have all the money in the world. Your goal is then to find relevant traffic, whether on Social Media sites, or with scheduling, BT/Demo-targeting, Smart Ads, etc. no matter how it is sold.
In short, it’s not how you BUY the impression, its how you expend the impression.
I think some for of CPM can still work if there are some metrics for evaluating quality. Things such as: time on site, Ad clutter/density, and Ad position (above or below the fold).
For sites like TC the purpose is the content and really none of the CPM Ads are relevant however from a branding perspective they do have some impact. Having said that in the case of TC other than RackSpace Hosting every other square banner feels like obtuse logo branding and I completely ignore them. The locator guy has more branding impact than whatever that (mt) ad means. I think if the ads themselves were a bit more engaging or clear as to what it was that was being sold I would be more interested.
Cheers – Eric
Like most things in life, you cannot change something by just asking politely. “First, just stop using the CPM. ” isn’t realistic although I agree with your other suggestions for change.
You mention that all of the flaws with CPM but It isn’t like other types media ad measurement don’t have the same problems. Ads in magazines are sold on circulation, no way to measure whether someone is opening up to the page in the ad and looking at it or not. TV and Radio the same, you can’t measure whether someone is actually watching or listening. It is the same fundamental problems with any type of advertising.
It comes down to this, if the agencies and the brands that do all the spending online decide that they want something different then CPM, publishers will adapt.
I think what Shelby is really trying to get at is that the industry needs to look at different ways to advertise on a site, not just banners, pre-rolls, and ad overlays. What we need to do is think of innovative ways to engage users with the advertiser’s dollar and input.
Let’s say you have a section within your site on dog training tips. Ad sales would almost 100% be focused on a few banners around each article, hopefully having to do with some pet products. But what if we were able to have some more creative freedom with those ad buys? Have an advertiser sponsor the content, link directly to a dog training product within, and at the end, of the article, do email blasts that are sponsored by the advertiser, offer custom links that link directly to a product.
Publishers and advertisers need to be willing to work with each other on semi-custom campaigns. By focusing primarily on CPM and CTR’s, banner campaigns will continue to decline. The future is in becoming strategic partners with an advertiser, and finding ways to make it a win-win for both.
You’re of course right, but let’s not put words in his mouth. His point was not “let’s kill the pre-roll ad unit” or “let’s kill the boring display ad”, it was “let’s kill the CPM” rate type. CPM as a rate type is not the problem.
Jordan, I disagree. The advertisers I work with a consistent basis aren’t willing to pay more money just for good content. They have to be sold garbage ROS just so that the CPM is within the metric that they wanted to spend.
I could offer very targeted content to the appropriate client but in order for the publisher to get the business they have to order what becomes a competitive CPM.
this seems more like a negotiating tactic your clients are pushing.
if site A provides better performance than site B, then you should be prepared to spend more on site A and look to develop a long-term partnership with that audience.
The problem you’re describing is not going to go away by killing the CPM rate type. The problem is one of advertiser behavior and idiosyncrasies within the market. Take “CPM” away and you still have all those idiosyncrasies/problems, yes?
Could not agree more.
The biggest problems with online advertising today:
1) Media buyers expect ‘big custom’ packages thrown in for free, and the banner CPM’s become the ‘currency’ of ad buys.’
2) Lack of relationship between Media Buyers and client Marketing department leads to piss-poor availability of assets for custom development.
3) The necessity and desire to get ‘in between’ a reader and his/her content, rather than supplement or improve the content experience.
I agree that all impressions are not created equally but CPM is the not the problem. It’s the obligation of marketers and publishers to understand this and put on the constraints. A few ads or even one large targeted ad is more effective then many irrelevant ones that should be obvious.
This nails it. Unfortunately the client wants the value of all the crap impressions too.
Really really good article.
Amen. I’ve been preaching this for years, so it’s good to know that perhaps I’m not an insane person. Perhaps.
Here’s an analogy: CPM is like measuring your car’s gas mileage in “Songs per Gallon” — if you listen to classical music (where songs are 20 minutes long), you have a really crappy mileage. But if you listen to the Disney Princess CD (average song is 1:45) then you suddenly have amazing gas mileage! “My car gets like 40 songs to the gallon!!!” The numerator is just completely nonsensical.
Same thing with the “M” in impressions: If I look at a picture of someone on Facebook, that is the same “M” as if I spend 8 minutes reading an in-depth New York Times article.
The relevant metric is “Cost Per Seconds of engagement”, which even lends itself to a friendly TLA. If I engage with an ad unit for two minutes, that is 120x as valuable as an ad that I glanced at for one second.
Here’s what exciting: This kind of “CPS” model would have been infeasible several years ago, but with the speed and ubiquity of today’s JavaScript engines, it is actually possible to measure how long a user views an ad, how long they mouse over it, and how much they interact with it.
Of course, it’s going to take a lot more than me, Shelby Bonnie, or even the entire TechCrunch readership to change such an entrenched standard.
But Kudos to Mr. Bonnie for trying.
My first take was Cost Per Seconds of Engagement WOULD make a lot more sense – until I consider how I and others like me open tab after tab to read sequentially. We often get busy and leave tabs open for a long time.
As far as I know there is no analytics solution that can determine WHICH tab I am reading for how long. Do some keep measuring indefinitely while others stop the clock after X time? I wonder how many have ever even thought to ask.
I admit I do not know what percentage of Internet users only have one page open at a time versus how many have many windows and tabs open at once; however, those buying by your model would definitely need to consider that factor.
@Portman, CPS already exists. Alenty measures how long ad-banners are seen (even with many tags, browsers, applications opened).
Some websites have already chosen to drop off CPM and start selling Guaranteed Exposure Duration.
Thanks for the great article Shelby. I agree with you on almost all of your points and I think after reading through the many comments, that some haven’t grasped that you’ve identified a broken ecosystem that’s bad for publisher, advertisers, and most importantly consumers and not just a broken way to sell.
The impressions-based model has led to an amazing number of extremely poor quality sites that as Shelby mentioned, have no real value outside of trying to achieve a Google SEO rank and then drive eyeballs to the page where they then use ROS ad network inventory to make a buck. Users click through thinking they have found something relevant only to find that it’s nothing but a paragraph of content (copied from another site in many cases) and a page full of ads. How many of those ads do you feel actually resonated with the consumer? More importantly, how do you think the consumer viewed your ad in light of their experience? The CPM leads to a shotgun approach in the industry where we try to hit users with as many ads as possible and hope that they get a cookie and then count as a conversion in someone’s spreadsheets. If you deliver 10 billion impressions, you’re sure to hit someone who was already going to convert.
From a metrics perspective, a lack of real progress in delivering a universally accepted way to measure the value of display inventory has continued to bring the CPM levels down to dismal levels. The only way you can get premium CPMs now is to either command premium audiences or to do a very IN YOUR FACE approach to the creative execution on your site in order to justify CPMs that are 10-20x what an ad network will give an advertiser.
CPC and CPA provide actionable and more accountable metrics, but as Shelby notes, only in limited situations where you’re in the purchase path or know what you’re trying to accomplish. The way humans make choices is a much more complex equation than most advertisers are measuring today. CPC/CPA ads reward the last click or last view, ignoring all prior exposure to media both online and offline. For large advertisers not in the online space, how do you determine the value of an impression if your product is bought at a brick-and-mortar retail level? How do you separate what you’re doing online with the national campaign you’re doing offline?
I think the general idea is that if we move away from CPM, we would see more of:
1) Quality publishers with better content, not just more – More impactful ads delivered at the right time and right place which is a triple-win.
2) More meaningful connections – Some of the most lauded campaigns in recent years have delivered more than just impressions to users. Delivering entertainment (subservient chicken), challenging conventional views (dove campaign for real beauty), and finding ways to connect to a consumer in a meaningful way is more valuable than just pitching them a message. This is what I think advertisers should pay for and it’s not simply throwing a placement and CPM on a media plan, it is actually understanding WHO your audience is, WHAT you mean to them, WHAT you stand for, and HOW you can make that connection.
The article raised many questions- but ended with no answers, but even more questions.
CPM will never go away, because marketers have in simplified terms, two objectives when advertising: (1) To create awareness/top-of-mind/brand equity, and (2) to drive a sale.
CPM is the appropriate metric to use when the goal is to create awareness or maintain top of mind. People don;t go out and buy a BMW every time they see one. But each BMW ad they view reinforces their impression of the brand, and due to the recency effect, when they do decide to pay a luxury car, they’re more likely to buy a BMW than some brand they haven’t seen advertised for 5 years.
CPA and CPC are more relevant when the marketer’s goal is to drive an action. To imply that CPM is useles is to ignore the fact that brand equity is enhanced every time someone views your ad- even if they don’t buy imemdiately.
Granted, the mere fact that an ad is displayed doesn’t mean it was viewed- or even noticed. But you could say the same of a billboard. So I agree that pure numerical CPM can be a waste of money.
The middle ground is not to abolish CPM, but to use tech to count only impressions that were noticed, not just those that were displayed. As annoying as they are, those ads that you meet on some website’s landing pages which you have to click through meet this criteria.
http://www.amusis.com
Your premises have fallen flat in my mind. Before even establishing a reason for change, you communicate how that change should be carried out.
Bottom line, the question I would like answered:
How does dropping CPM make me more money as a publisher?
Any healthy market has supply and demand in balance. You can’t produce more widgets than there are widget buyers. The fundamental problem with the current pricing mechanism married with no natural constraint is that our widget factories are dramatically over-producing impressions relative to demand. It has led to complete commoditization (sp?) and favors the low-cost content producer versus the best quality producer.
Publishers will benefit if we can move to some pricing system that has supply constraints and leads to a healthy market.
Yes, however, widgets is a different product than desires. One is tangible, the other is not.
Problem is that essentially there are no constraints on the internet in terms of impressions. Just as long as users are spending time on the internet they will produce impressions for some site or another.
So how would you impose constraints and more importantly how would you enforce those constraints? Or are you talking about organizing the publishers in such a manner that they act as a single block and they dictate the pricing?
Wake up and Smell the Coffee…
(Just start running black banners with “Can the Ad” in then)
It’s still early to make a hard shift away from CPM because we still need to move many, many more traditional advertisers over to online – CPM is the most direct path since it’s what they know. It’s not as natural as shift to move to engagement, etc. as a pricing mechanism alone since it’s not as simple a transition away from the small banner as when we killed the small banner when Shelby was Chairman of the IAB–it was simply a matter of resizing banners. We need to have a transitional strategy where buys and post buys are valued both on CPM and engagement, etc. in order to evolve beyond CPM. At least we’re moving past click-through rates.
Shelby’s point that the fundamental problem with the current online advertising business is that there is too much supply of poor impressions relative to demand is right on the money.
But the market could move to value audience over context, especially with greater availability of targeting data, the ad exchanges and the trading/bid optimization platforms that are being built on top of exchanges. That will more than anything will solidify CPM as the dominant pricing mechanism.
The buyers want commoditization while the sellers want differentiation. It will be an interesting battle in the coming quarters.
This post is about 4-5 years obsolete!
The days of big branded advertisers on the web buying up unmeasurable impressions are over. For an ever increasing number of online advertisers, everything backs out to a CPA (or CPC) or some other quantitative measure they deem appropriate to theor campaign. The CPM is just an exchange rate, but every advertiser backs that out to a metric that makes sense to them, CPA or otherwise!
Right, but the publisher wants to know exactly how much they are going to make and that is why they do CPM instead of CPA or CPC. If an advertiser does a CPM campaign through your site and they come back immediatly and by more you know the campaign was successful for them on a CPA or CPC. Therefore you may be able to raise your prices.
Really, what needs to happen is there needs to be one centralized database for all CPM ad locations and each ad space needs to be rated by a third party or advertiser. Is the ad above the fold? How many ads are on the page? How good is the content? Is it a social network where someone is updating their status and in no way paying attention to ads?
Many large advertisers still think in terms of reach and impressions. CPA and CPC create attribution problems and ignore the value of media at all points prior to the point of conversion. This is why search engine conversions are overstated because users are increasingly using search as navigation.
Let’s assume you are Ford and the new Taurus SHO is a pretty hot car. You buy an ad on some auto blogs and a user sees the ad and then goes to Google and types in “ford sho” and they see your search ad. Click on ad. Read through it. Click on “Request a test drive”. Conversion accomplished. Source of conversion – Google. This is how 99% of online marketers look at their online programs today – in silos or with primitive cross-attribution techniques.
I think what Shelby is advocating for is more integrated and valuable advertiser-consumer opportunities. Instead of buying a banner, Ford could perhaps sponsor a mini-site on an autoblog to allow users to play a Ford driving game or maybe a comparison feature where you tell them your current car and they will animate how acceleration, cornering, and the interior is differentiated (please pay me if this idea is used because that would be soooo awesome).
“The ultimate losers are the users. They get a lot of bad content and bad ads. They are literally overrun by ads all day.”
Shelby-
Thanks for this. I fully agree.
Cheers,
Jon
The CPM should not be killed off. These types of blanketed always raises my red flags.
There should always be a hybrid of back-end goals along with the CPM — an end to end solution for effectively measuring the impact of your message and brand (like post click experience, data acquisition, etc..). But killing off the CPM for online is ridiculous. Impressions have value, impact, and it’s measurable. That’s a fact. If the creative execution is low quality, I have a difficult time connecting the dots to how it in anyway relates to whether or not the CPM should exist. The point is, the problem is else where. Maybe people don’t want to own up to real problem.
Thank you! Someone needs to come up with a Cost Per Action (CPA) methodology. Allow the advertisers to define the actions they want and or are willing to pay for.
This would create much more dynamic content for users and far happier advertisers. I tried out the Stumbleupon CPM model and thought it was a joke.
As someone who wants to sell product, how does flashing my page to someone who is “stumbling” around EVER going to generate a sale. Pun intended.
It just doesn’t work. How about letting me define some actions or destinations I am willing to pay for and charge me when the visitors get there.
It may be less of a quick buck but longer term I would be more invested and willing to allocate a larger budget to these types of methods.
@ Defunkt Shirts — almost every major ad network out there will run on CPA. They will just back out an eCPM and your inventory allocation will be dependent on how well you convert.
What if the action isn’t measurable right away? What if the profit gained isn’t financial but emotional or conversational?
Company A creates an ad campaign that has people talking. This generates more news/PR for the company. Over a period of time, that may increase sales for the company’s product outside the scope of even the product they’re selling.
Company B just goes out and buys CPAs. Content producers don’t realize a reasonable profit because they’re getting paid only based on an action (a purchae, a sign-up, etc) and in some cases, that action may happen beyond the time-limit of the contracted terms of the payment. This causes the content producers to not even want to bother accepting those ads, which has the added effect of Company B not getting the long term gain that Company A might have by creating a fun, attractive and popular ad campaign.
Coke ads never made me get up off the couch and buy a Coke, but I’m sure the branding goals were met. They maybe paid $5 million for a campaign that sold an immediate 50,000 Cokes, but how many more were sold because the name/logo/etc stuck in the person’s head?
um cost per click works. As someone using google cpc, I am happy to pay for ads that people interact with and not have to pay for some nebulous concept like branding, or mindshare. Sure advertising is a cost of doing biz, but I want some measurable ROI for at least a portion of my expense. I have listened to many “account managers” try and convince me that just because the ROI can’t be measured to the penny, that I should not overlook the “branding” and “mindshare” I would gain and can I afford not to advertise?
I think content owners are afraid of CPC because they know that they would lose massive ad revenues since all the CPM money they get is really just smoke and mirrors. Advertisers have been conditioned to not expect any truly “measurable results from campaigns. I for one don’t buy it.
CPC works on *some* sites, but not on others. It depends on where the site’s content sits in the purchase process. If it’s at the end — i.e. a site that focuses on deals or something that drives the user to buy — then CPC is a great model. But if the site’s content sits at the beginning — i.e. a site that delivers news and information — people are coming to the site to learn, not to buy. The branding of the ad still works (in many cases better than the previous example), you just can’t judge much by the clicks or the conversions.
It will be some hard word to break traditions like bookings by CPM, CPC, CPA – it needs understanding of Quality and Market Mechanisms.
Why do we have so many bad sites that republish the same junky content–content that’s often made by machines or $1-per-post contractors?
If you’re going to attack Maholo, please have the courage to do so directly.
Ha Ha Ha Ha…
What about machines that make ~better~ content than people.
If you’re a sheep, “we can build you” and replace you with an electric sheep.
If we killed the CPM who would have paid for this article? Everyone has grown-up with a free web and free TV media in the form of NBC, ABC, CBS. How many websites do you visit vs how many magazines you subscribe to? If CPMs go away publishers in my opinion are left with 1 option: subscription. I wouldn’t be willing to pay for 50+ subscriptions (number of sites I visit), would you?
Also, take the first step and remove the IAB Leaderboard you have at the top of GiantBomb. Maybe you are and have plans to do so very soon. Until then it seems like a double standard to say we should kill the CPM yet you aren’t being the leader and doing what you preach.
From one Wahoo to another, couldn’t agree more. In fact earlier today I received the “dreaded spreadsheet” from an agency.
I would have loved to have read this post but I was too distracted by the 18 shiny ads all over the page.
linkfluence.net might have a good solution for it. They monitor the links between website to create “maps of influence” (an sample is showed here : http://labs.wik....net/wikiopole/ ) I’m sure they aren’t the only guys to do this kind of stuff.
That said : a wiki centric with & open source apps MUST (ok, should) solve this problem:
3 reasons for that:
- the problem is share by ALL the market (publishers AND advertisers)
- the marketeers would receive more by giving away their knowledge about a limited number of web site than they could receive if they kept this knowledge for themselves, they know that their knowledge have a value Only if it is aggregate –> therefore a “wiki” approach should work here
- there is a technical need to monitor “spreading” of information over the net, and this is a Real challenge for researchers –> therefore open source software can work here too: this is “THE” challenge of today’s internet!!!
What do you think guys?..
Hey Shelby! Right on! CPMs may not be dead yet, but it should be obvious to everyone that they are dying… so, yeah, end the suffering! Euthanize CMP!
Having worked at P&G for over 10 years in marketing I can tell you that when marketing a product a Brand manager cares about 4 things:
• What % of the target audience did I reach?
• How long did they engage with my brand?
• What were the resulting brand equity attribute lifts/declines?
• How much product was purchased as a result?
It’s that simple. Yet the current measure of success is how many ad impressions were served and what was the click through rate. Those two measures don’t answer any of the questions above. So as Shelby stated publishers get users to click through as many pages as they can and make ads intrusive enough to get clicked on better than the average but not too good because they don’t want to lose the user.
However, killing the CPM won’t solve this problem nor can it realistically be done with the way he describes it. The “movement” will have to be lead by one of the big players in the space. My guess is that movement will be lead by Facebook for the following reasons:
1. They have the most to gain by moving away from the CPM and CTR model (cause it doesn’t work for them today)
2. They are small, private, motivated enough to try any revenue model – The portals cannot experiment too much because they have public shareholders to answer to every quarter
3. The portals will follow very quickly because they are all watching to see what facebook does with this massive audience
I am happy with any means for killing the CPM. The reason I said movement is that it will be killed if it goes through committees. When we changed the Ad Standards back in ‘01-’02, there was a small group of industry players who met, joined hands, and jumped.
We recognized that if we tried to do it and placate all the different agendas, we probably would still be working on it today.
Facebook might have the clout to change the game alone and that would make me the happiest guy in the world.
Who to contact at Facebook? I tried to contact Facebook’s Monetization Team for a new advertising model that can become the killer best way to monetize social networks but no answer so far.
I like Shelby’s idea of an open source movement for industry leaders to back up disruptive business ideas from entrepreneurs to innovate in the Online Advertising space. It could help on adressing critical issues, like introducing a new industry standard, that can only afford big players or the whole industry. Maybe IAB could focus in that direction and start this initiative as all their members could benefit from it.
I like this post, but heres some answers to your 4 points:
• What % of the target audience did I reach?
How do you measure this on an anoynmous medium such as the internet? You could do surveys, but that would drive people away.
• How long did they engage with my brand?
P&G is huge and they have so many brands its not funny. You could measure this by the number of page views or time spent on site after they click through the ad but this doesnt tell you much. It would be nice to know how long they spent looking at the ad, or if they seen it how long they spent trying to re-find the advert…
• What were the resulting brand equity attribute lifts/declines?
I think this can be answered by focus groups before making it public or asking people afterwards through surveys.
• How much product was purchased as a result?
This is difficult to measure again as you may not sell the product from your site but a retailer, how do you measure this increase and take into account seasonal trends? Perhapse “free samples” would be an idea but how do you measure this beyond the intial usage.
The other issue is that I would assume is that P&G want people to use a product for a long time to get repeat sales. CPM/CPC do not reflect this and CPA to a lesser extent.
Site A advertises a new razor, the initial month of CPA/CPC/CPM advertising increases brand awareness for the first 2 months. The product takes off phenominally through word of mouth, repurcahes, gifts etc. Advertising is pulled from websites because its self sustained at this point.
As a publisher I cant write to you and say well if I knew it would sell so well and I wouldn’t get any repeat business after 3 months I would of charged you 10 times the amount…
To me CPM with good creatives/original marketing is the best converting metric for both advertisers and publishers.
Advertisers have a budget and want to know how many potential eyeballs they can get, publishers want numbers they can go to their bank/accountants and say this is how much I take in per month. To plan the future growth of their business.
If its any other way Publishers wont have much of a reason to even display advertising (trust me running a site has become extremly cheap for most people) unless they are in full control of what money they are taking in.
Great article, excellent comments.
It’s interesting that the majority of those commenting seem to be professional CPM crunchers (their comments are as long as the article itself – CPMs for comments anyone?
)
I like the term direct-response advertising. This is what I would sell – when I have something to sell, eventually.
“I have been in the Internet media space for 16 years and will start by stating the obvious”
Indeed let’s start by stating the obvious. You weren’t on the web in 1993. Neither was CPM. The domain cnet.com was only registered in mid 1994.
http://groups.g...a210e5f72278328
Mosaic wasn’t even released until Oct 1994.
16 years huh?
That was v1.0 unless I’m mistaken. I was using earlier beta versions of Mosaic in July 1994 — publicly available.
CNET was founded in 1993 and we were working with Prodigy, Compuserve and AOL — in that order
you guys clearly don’t know who you’re talking about. really. you don’t.
Young man… When I started on the internet (1979) I am not sure if you were even born. So Mosaic has little to do with what was going on content wise on the internet way before Apache etal…
Just because you were born way after the fact doesn’t mean there wasn’t a lot going on before you were born.
Wake up and Smell the Coffee…
Some of you guys are flippant for no reason. http://www.brea...et_in_1993.html. In 1993 there were already millions of people on the internet.
Great post Shelby. I’m so excited to hear this from you. So many thoughts to add, but after reading the comments I see things going in a direction that doesn’t really strike at some of the core change that needs to happen.
Specifically, measurement isn’t as big an issues as the volume of comments seems to suggest. Media is more measurable today than it ever has been. Driving expectations pretty high.
Mainly what I draw from this is, as a publisher, creator, or manager, is to deliver value well beyond the expectations of the buy side, and it could lead us into the next era of online marketing. The concentration can’t be on impressions or clicks, but some action of value for the ad buyer that is not in discord with the goals of the publisher.
For example, CPC is lopsided in the amount of risk the buyer takes on and therefore ultimately not of value. E.g. the publisher has little incentive to avoid “bad” traffic.
Maybe a little overdue, but thanks for posting this Shelby.