Commentary

Considering a New Way to Pay for Ad Serving

Do you remember the first time you used a third-party ad server for an online advertising campaign? How excited were you that you no longer had to track down reports from ten, twenty, perhaps forty different sites and then input them all by hand?

Okay, sure, at first, you were still doing that, because ad serving counts never matched site-reported delivery. In order to reconcile invoices, you had to check the site's version of things.

But for the most part, third-party ad serving was a godsend. For the first time, agencies handling multi-site buys for the clients had a single data source to which they could go and pull reporting for all the sites at once. The output was more or less easy to read and the data easy to extract.

As time went on, third-party ad servers became more and more robust with data collection and mining tools. It isn't just simple impressions and clicks anymore; we can learn post-click activity and post-impressions. Visits, registrations, purchases, amount spent... you name it and the third-party ad server can give it to you.

advertisement

advertisement

With the advent of the third-party ad server, agencies firstly became more efficient and secondly became smarter. Personnel whose responsibility was to handle client reporting fell on their knees and wept with joy at the amount of time saved by using a single data source, while planners and analysts and strategists rejoiced at having more data they could turn into information for their clients.

And all this could be had for (and is still had for) a small fee; a CPM, to be precise about it. For anything from 10 cents to $5 I could serve one-thousand impressions across a vast array of sites.

In the early days, this system seemed to make sense. The argument was that a CPM pricing structure was scalable, compensated for use bandwidth, and worked pretty much just like media pricing.

The difficulty was - and still is - that you could never really plan accurately just how much you were going to need to budget for ad serving. Site delivery, by and large, is notoriously inconsistent, meaning that your cost estimates are going to be off. And these days, many sites with the extra inventory want to look good to the advertiser, or perhaps yield a lower effective CPM, so they intentionally over-deliver. Sometimes, a placement is event-sensitive - maybe you road blocked the weather page and it turned out there was a huge storm that day, making the area very popular. With this, again you have more over-delivery. To paraphrase Yoda, always in motion is the ad serving fee.

I've tried different things to prepare for the unknown of a final ad serving fee, but nothing works too well. Estimate some percentage of over-delivery, like 25 percent. Or set aside a contingency budget.

If you overestimated the costs of ad serving, you're typically okay; it looks like a savings to the client. But if you underestimate, watch out.

I've been in advertising some ten years, and I have yet to meet a client that doesn't mind an unfixed cost variable. Typically, when you tell a client something is going to cost 'X,' then that something needs to cost 'X.' It is a terrible thing to go to the client and say, "the good news is, our campaign over-delivered by 100 percent. The bad news is we need another $25,000 in ad serving monies."

The time has come to change the way we pay for ad serving. Instead of tiered CPMs based on impression load, we need tiered flat fees.

I think, to serve less than ten million impressions, it should cost $2,500. Ten to twenty million, it should cost $5,000. Something along these lines would work best for everyone. For the media planners and buyers, they would have a fixed cost variable for their plan. For the ad serving companies, they would make more money on the low-end impression level bracket that more than makes up for whatever they might be losing on the high-end of the impression level bracket by transitioning from CPM to flat fee. It is kind of a "dollar cost averaging," if you will, across different buys at different impression levels.

Another good thing about a compensation system like this, is that agencies will no longer be paying a penalty for being good negotiators. What I mean by this is, the lower my media CPM is, the larger percentage ad serving becomes of my media expenditures. I would rather have my media dollars working for me in media rather than in the facilitation of media.

This is not an issue of earth shattering importance at this time; I'm not saying this is a big deal, but it is certainly something to think about. Ad serving companies are still going to make their money, and as bandwidth costs next to nothing, that no longer holds sway as a good reason why advertisers should pay on a CPM basis. Let's be daring and go with a flat fee.

Next story loading loading..