Firing SQAD: Data Firm Sets 'CPM' As Online Ad Metric

In a move that will likely align the ROI of online advertising more closely with that of traditional media such as television, an influential source of media marketplace data this morning announced it will use Madison Avenue's long-standing CPM, or cost-per-thousand, metric as the "currency" for tracking online advertising. The announcement by Tarrytown, NY-based SQAD, comes as other influential industry source are trying to reshape online media in the image of television, and as online industry insiders wage their own debate about the best metrics for evaluating the efficacy of their medium.

Instead of CPMs, which value a medium based on how much it costs to reach a thousand audience impressions, online media often is valued based on results or actions more akin to direct response of "performance"-based media, including CPC (cost-per-click) and CPA (cost-per-action) metrics.

But SQAD's initiative comes as Madison Avenue is racing to standardize its buying metrics for television, abandoning the decades-old CPP, or cost-per-point (as in TV rating points) metric for spot and local TV buys, and standardizing all local and national TV advertising deals around the CPM.

That push, which is part of an American Association of Advertising Agencies' initiative known as Project Reinvention, which will be discussed in greater detail at the association's media conference in New Orleans next week, is part of a broader industry move to standardize metrics and buying systems across the major media to make it easier and to implement, manage and evaluate advertising buys across them.

"Since there is currently no industry-standard equivalent to cost-per-point in the Web display space, we elected to focus on CPM in the initial WebCosts release," Neil Klar, CEO of SQAD says of the company's rationale, which came after discussions with the AAAA's influential Media Policy Committee.

Klar adds that the move does not necessarily preclude the adoption of the online industry's CPA and CPC metrics, but that CPMs initially will be the "name of the game" for SQAD's online advertising estimates.

WebCosts, which has been in development for several years, is a spin-off of SQAD's popular NetCosts service, a database that aggregates actual network TV advertising costs from national advertisers and agencies, and reports average CPMs.

"When the Media Policy Committee suggests using CPM as a universal currency to facilitate negotiating mixed-media packages containing network, spot and Web components, they're talking about standardizing on data that SQAD already supplies to its broadcast subscribers and will soon be providing to Web advertisers, agencies and publishers," he says, adding, that the move will help facilitate "apples-to-apples comparisons for multi-platform buys as well as single media deals."

That scenario, of course, recognizes that some of the highest growth, and most highly valued advertising inventory being generated by online media is online video advertising, which frequently is packaged as part of so-called multi-platform deals by TV networks who sell TV and online video impressions as part of integrated buys.

It also comes as a number of other key industry sources, including audience researcher Nielsen, and systems providers including from Microsoft, Google, Spot Runner, and the cable industry's Canoe Ventures, are racing to establish state-of-the-art trading systems that will make it easier, and more standardized to buy video advertising impressions across TV, online and ultimately mobile media platforms.

11 comments about "Firing SQAD: Data Firm Sets 'CPM' As Online Ad Metric".
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  1. Nina Leon from SkyeSterling, February 24, 2009 at 9:38 a.m.

    While I understand the why, it seems like such a step back into time. CPA is so much more desirable to the online advertiser. I realize doing the reverse and basing pricing in other media based on CPA is not realistic, but going back to CPM... It seems like time travel back into the old days of non-measurable mass marketing. The entire advertising landscape has changed and may look very different by the start of 2010. To pluck the metric of the dying print ad is odd.

  2. Michael Mcmahon from ROI Factory / Quick Ops, February 24, 2009 at 11:14 a.m.

    Bravo! This has been an issue since at least '97. Media sell impressions, not actions. There are too many other factors after the impression that are dependent on the advertisers' creative, pricing, brand, etc... to make CPC/CPA metrics from one advertiser comparable to another advertiser. It's up to the advertiser to determine the effectiveness of that media in achieving their objectives and negotiating CPM for each campaign based on that data. We all know the old media metrics such as reach, frequency, and cost per point pale in comparison to the more accurate online metrics, this is a great step towards giving advertisers the ability to compare effectiveness based on a comparable metric, CPM. When we calculate the ROI, it's great to be able to start with a metric, CPM, that is consistent across all media. And I completely agree that this is an important step as we move towards more online video advertising.

  3. Tory Lynne from Magnetic, February 24, 2009 at 1:20 p.m.

    I think it would be interesting to see a combination of CPC and CPM. For instance, it could cost .05 cents for every time the ad was seen and an additional .03 cents for the click. A click means more interaction, but the lack of one doesn’t mean the customer hasn’t noticed the ad.

    Say I see an ad for Coke – just because I don’t click through to their website and immediately order doesn’t mean I didn't get a craving and go to the nearest vending machine!

  4. The digital Hobo from TheDigitalHobo.com, February 24, 2009 at 4:09 p.m.

    This TV vs. Online cost discussion makes us all look stupid. Why? Because at the end of the day, we're paying "X" amount of dollars for "Y" amount of people.

    GRPs and Cost Per Point- Points = X number of people, right? Right.

    At the end of the day, everyone can back into a CPM or an eCPM and make a fair comparison of what you are paying online vs offline.

    The fact that neither the online nor the broadcast sellers and buyers will work together to do some fairly simple math is an embarrassment for both parties.

    Let the publisher/broadcaster sell on whatever terms they want to. Let the advertiser buy on whatever terms they want to. Back into whatever standard metric you want to. Its 3rd grade math.

  5. Gregory Johns from Initiative, February 24, 2009 at 4:42 p.m.

    Well, I'm sure procurement departments all over America will love this to death (glad SQAD knows there true audience).

    Trouble is, at best this would be applicable to video pre-roll/mid-roll where at least you have some commonality in the spots.

    When it comes to banners though, all bets start to come off. Size, position, # of ads (amount of crap on the page in general) are all going to make a nightmare of reducing this to a common metric. (that's relevant at least).

    I wish online planning/buying was a simple as beginning/middle/end of pod, but those of us in this wacky mess know it's not.

    In the meantime, we'll all now have an even more fun time convincing a procurement department why we didn't buy $0.25 CPM crap on the bottom of a Myspace profile page. And worse, online will begin looking more expensive than TV in many cases.

    That's why I feel if anything, we've got to try to devise ways to define a standard of media engagement...it's (in theory) indicative that the media actually WORKED.

  6. Matt Antinoro from Entercom Boston, February 24, 2009 at 6:02 p.m.

    From the perspective of a traditional media rep (radio and TV, specifically) CPM seems to be the lesser of the evils here. We're all better-served with the ability to integrate seamlessly with other offerings, and the agencies and in-house buyers aren't looking for extra work in this "do more with less" economy, so one system of measurement that can express value regardless of the medium makes it easier for us all to prove our worth. What's more, as the lines between the mediums are blurred, we stand to make more money with more tools in the toolbox, no?

    In a CPC context, I'm putting my destiny in the hands of a "creative" who probably doesn't fully understand what's relevant and exciting to my audience. Even when WE'RE doing the creative, why would I encourage someone to reduce my station to pure numbers and allow myself to become a commodity? I've got a loyal, passionate base of p1 listeners who open my emails and visit my site every week because I'm the only one providing the content they crave.

  7. John Grono from GAP Research, February 24, 2009 at 6:13 p.m.

    Nina ... to explain. CPA attributes 100% of the acquisition to 'the last click'. This does a great disservice to the rest of the marketing campaign and the other media ... and is akin to saying that the most effective part of the equation is the check-out operator in Wal-mart. CPA is so inherently biased, whereas CPM isn't. CPM allows comparison across all media on an equal (or near-equal) footing. In Marketing 101 this is the bedrock of communications planning. This does not mean that CPA is not important, but it comes later in the mix.

  8. Paxton Song from Veruta, Inc, February 24, 2009 at 6:38 p.m.

    I believe in today's market it's difficult for advertisers to justify ROI based on CPM. The problem, however, with CPA, as has already been pointed out is that "last click" is hardly a fair metric to judge a campaign by.

    So we at Veruta.com are providing a service based on CPe -- Cost Per Engagement.

    In essence we are providing deeper analytics on how viewers engage with the ads--be it scrolls, hovers, or clicks.

    Again, i don't expect this debate about CPM/CPA/CPe to disappear anytime soon. The truth is, it is extremely difficult to be able to attribute weights to users' actions based on the type of medium the user was exposed to.

    Our effort with CPe is to at least bring transparency to their actions and ascribe value to that action closest to the point of view-through.

    I welcome private responses to: paxton@veruta.com

  9. Steve Wind-mozley from GAME Group plc, February 25, 2009 at 3:23 a.m.

    An oldie, but goodie - this one is set to rage and rage.

    My take is that both CPM and CPA are flawed. We as advertisers should be looking at acquisition attrition. Like the CPM model this allows us to value and assess the contribution made by every click step in a purchase path. Unlike CPM, it does not hide poor quality traffic from the glare of the ROI hunter. So it mirrors CPA in that you apportion the value of the acquisition or lead back across the click path, using a weighted apportionment mechanic. Let me give you an example:

    Customer A pops along to Google and conducts a search, he's early in his purchase journey so he has a very generic query – “where can I get an Xbox game console?” This query returns our SEO link, which he clicks on. He browses around, does a bit of research and then gets back to work.
    That afternoon, after picking his kids up from school, he fires up Google again and refines his search query - this time he looks a an Xbox Elite bundle deal. This time he is tempted to click on a very relevant PPC link which leads him back to our site. Being a cautious guy he the checks a price comparison site for the best deals and sees an affiliate link back to our site. He bookmarks the URL goes home, asks his long suffering wife if the household budget will spring for the cash and then direct loads the page and makes the purchase.
    CPA would give the bounty and your attention as a marketer to the affiliate link, when in reality it was the combination of SEO, PPC and the affiliate link that built the purchase path. Click attrition would allow us to reduce the amount paid to the affiliate, which in turn allows us to compensate (or allocate budget to) the other key click steps.
    Sounds great? But it's tough to do as it involves having frank conversations with all of your media channel partners and getting them to agree to accept a unified tracking tool. But it is do-able – and in these current economic climes, it is becoming a powerful way to drive marketing efficiencies for your online channel.

    Tally Ho!

    swm

  10. John Grono from GAP Research, February 25, 2009 at 5:17 p.m.

    Steve - an erudite example of a typical search pattern.

    Just to add another 'grain of truth' to the complexity of this "most accountable medium", because Customer A initiated the first search at work and the second search at home, we're talking two different cookies here, so 'the link' for Customer A is lost. The link will be re-established when Customer A decides to purchase the X-Box. However, if Customer A makes the purchase click at work Cookie #1 will be credited and the browsing at home will be invisible. Similary if the purchase click is made at home after discussion with the family the original search will be invisible and no 'credit' applied.

    One only hopes that Customer A doesn't delete cookies - because then any semblance of what really happened has long since gone out of the window.

    So what really happens in this long chain of broken cookies ... last search wins. So, if Customer A's family sit around the kitchen table and decide that XBox Elite bundle deal represents the best value and type that into Google (with around 80% of the search market) ... guess who gets all the credit.

    This is why I like to think of online as the "most countable medium" ... we count lots of things ... many of them misleading ... and end up calling it accountability.

  11. Patrick Fitzgerald, February 26, 2009 at 8:57 a.m.

    As a seller of "traditional" media who has moved over to the web in many cases I feel as though I am watching reruns. I am always fascinated by the online/digital community and their insistence that they are The New, New Thing and the medium is different in every possible way. In the end, none of it will matter; Gregory Johns has it correct, the ratings purveyors will address the needs of their clients and deliver the metrics that they can sell to the primary buyers of the media They will insist that the publishers/broadcasters/out of homers respond to RFP's in that currency. It is fait accompli for anyone that is serious about delivering earnings to investors or themselves. Back this horse named SQAD if you want to stay in the game. It only represents a "new" normal; flawed or not, it will be standard currency and provide the primary buyers a simplifying machine to normalize a buy across platforms and report to the clients how they leveraged an awesome buy.
    More navel gazing over metrics and their value is only providing the buyers with leverage against digital. The metaphor was applied above; TRILLIONS of dollars have been invested in television, without ever requiring that the viewer hop out of their seat and immediately engage/consume/purchase the product. Digital sellers are hurting themselves and devaluing the media by promising to deliver this.

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