Commentary

The Necessary Death Of The CPM

The Interactive Advertising Bureau reported that as many as 36% of online advertising impressions were created by bots, meaning the ads were never seen by human eyes. With the digital media industry expected to grow to $50 billion this year, fraud is leeching the digital advertising ecosystem of billions of dollars in value.

Interestingly, this problem matters a lot less to certain types of advertisers. Specifically, those brands that are trying to use digital media to drive an online action (direct response) like a sale or a sign-up have less to worry about. Direct response advertisers don’t really care if their ads are seen – all they are concerned with is that their ads cause consumers to take the desired action. If they can spend $100 in digital advertising and make $200 in revenue, they don’t care what happens in between. This approach reflects a clear understanding of how those brands derive value from their investments. In many cases these advertisers don’t pay per impression (CPM), but instead only pay when the desired action is completed (CPA or CPL).

There is, however, another type of advertiser who should be extremely concerned about the recent estimates of fraud on the web. These are advertisers who expect their banners to have a latent impact, or an impact on less direct metrics like intent, awareness or favorability. The impression itself is where the impact is supposed to be made and, if more than one-third of their impressions are never seen by human eyes, they are missing out on a lot of the value they think they are getting.

The industry is buzzing about solutions, and there are plenty of companies coming forward claiming to help solve this enormous problem. But growing just as rapidly is the use of programmatic platforms to access inventory found on open marketplaces, or ad exchanges, where this type of fraud is next to impossible to prevent. In addition, even those companies that claim to be able to detect and prevent fraud will be the first to tell you that it is not a perfect system. Every time they come up with new technologies for detecting fraud, the bots find a new way of gaming it.

So what’s the solution? Here’s one: let’s kill the CPM for digital advertising. Let’s stop worrying about whether or not impressions are seen and instead buy against what really matters. In the case of brands that don’t care about online actions, let’s hold our media accountable to units of lift in those key metrics like intent and awareness. Cost per unit of lift could help brand advertisers achieve their goals in spite of the growing network of digital media fraud perpetrators.

If we kill the CPM, the digital media industry would suddenly find itself unable to sell worthless inventory. Anything created by bots would become impossibly inefficient at achieving clients’ goals, and therefore demand for such inventory would go away. If advertisers stop paying per impression, and instead began demanding to pay only when results are delivered, worthless impressions would cease being monetizable and therefore would find their way out of the digital media melting pot.

Until we can create a foolproof technology for preventing fraud, we must demand that sellers commit to align their goals with the brands they call partners. By doing so, and eliminating the demand for impressions that mean nothing to anyone, we’ll be one step closer to becoming a truly viable medium that commands its share of the marketing mix.

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6 comments about "The Necessary Death Of The CPM".
  1. Bob Hogan from eAdvise , May 13, 2014 at 11:02 a.m.
    I'm in agreement with you part of the way, Dave. But to banish CPM all together in favor of paying only on performance or conversion won't work until publishers can have equal say with brands on the creative messaging in their ads. Targeting the right environment for ads to run in is only half the battle. The creative message and the call to action are the other half and to be solely at the mercy of bad creative (and there's a lot of it out there right now!) is too risky.
  2. Neil Pace from McCulloch+Company , May 13, 2014 at 11:19 a.m.
    Here's a similar perspective on fraudulent web practices: http://www.goodmediaideas.com/blog/bid/385366/Why-is-Online-Advertising-still-the-Wild-Wild-West
  3. Dave Martin from Ignited , May 13, 2014 at 12:03 p.m.
    @Bob, fair enough. Although I'd say turning a blind eye to fraud and willingly deploying bots to inflate traffic or create impressions are both worse crimes that running bad creative.
  4. Chris Verzello from BitTorrent , May 13, 2014 at 1:28 p.m.
    I think as a publisher, it's our responsibility to provide high impact ads that users see, and engage with to enable advertisers the ability to move an audience. Nobody wins long term when publishers stuff ads below the fold or worse to use technology to fool technology into counting impression or clicks. I like where you're going with this thought, and there is a lack of industry controls related to how many ads appear on a page, and if they're ever viewed. Attribution also has a few flaws as the ad doesn't necessarily need to be viewed to be attributed to a conversion. Progrommatic buying with last view attribution models really confuse the issue, so some of the clean up needs to start there as well. Media should be valued by impact for sure! I'm not sure we need to eliminate CPM, but agree that the quality of media placement within a user experience should relate to cost of media.
  5. Karlin Linhardt from InStadium , May 13, 2014 at 3:50 p.m.
    In a word, Amen! Let’s kill the CPM! But as we advocate the storming of the Bastille, let’s recognize the bigger issue: CPM has become the universal, primary (and in many cases ONLY) metric for all media, not just digital. Because of this, the true goal of marketing…impact per exposure…has been all but forgotten in digital AND video media. In digital, advertisers are buying low CPM tonnage that includes significant amounts of bogus impressions. In video, advertisers are buying low CPM tonnage that includes significant amounts of wasted impressions: the heaviest viewers seeing a brand’s ad 40x or more per month, BEFORE being exposed to digital ads. Let’s be real: CPM is too ingrained in the planning & buying process to be summarily eliminated. And, predicating buys on lift results means more work for agency teams: pre-planning, research design, and post-reports consistently executed. That’s why we’ve gotten to where we are: it’s just too easy to continue the status quo. How to effectively move forward? Let’s first recognize CPM is metric of cost, not value. We need value metrics, such as those that quantify the impact of each impression, not just the cost. That will lead to better, not just cheaper, buys. Clients, planners and buyers need to seek and work with media vendors who come to the table with research metrics as integrated components of the proposed buy: those who are willing to put their money where their mouths are. We have the ability to measure engagement & response levels that drive strong advertising ROI: we must commit to best strategies and practices that quantify best results. But, this only works if everyone remembers the old cliché’: you get what you pay for. Media that delivers research-proven, best-in-class results from impact will have higher CPMs than media that’s watered down with bogus or wasted impressions. Is our industry ready to do the right thing for better quality results for our clients?
  6. Tom Goodwin from Tomorrow , May 14, 2014 at 4:55 a.m.
    Moving only towards CPC or CPL would mean that many publishers make no money and cause more problems by freezing out large amounts of the market that know nobody in the right mind would ever click on an advert in their category. While I totally agree with the problem and it's an interesting solution, a lot of the promise of display advertising is for people to focus not on better targeting but on proper creative. Online ads currently do a terrible job of building awareness because they are terrible ads. If we notice banners in Print, why not online? The quality of the creative needs to be improved and moving to CPC won't do that, it will make people either give up or find contrived ways to make people click that won't work.