• by Michael Kubin , Op-Ed Contributor, January 20, 2025

I recently found myself at one of those media conferences where experts toss around acronyms like confetti and PowerPoint slides threaten to cause death by bullet point. But despite the smattering of attendees shopping online during the panel discussions, I was impressed to see a good number of people actually taking notes and engaging with the content. So far, so good.

Then it happened. One of the panelists – a Yoda of the media world – calmly declared, "the CPMs for addressable television are high."

I nearly popped out of my seat like a champagne cork at a wedding. After two decades of working in addressable television, I know there are two things wrong with that statement: first, we don't use CPMs to measure addressable TV, and second, the costs aren't high at all. In fact the opposite is true. Let me explain.

Think of addressable television as laser-focused advertising. Instead of broadcasting the same commercial to everyone watching "The Bachelor," addressable TV lets advertisers show dog food ads only to dog owners, car ads to people actually shopping for cars, and diaper commercials to new parents. It's precision marketing at its finest.

Here's where our expert went wrong.

In addressable TV, we use eCPM (effective cost-per-thousand against the target audience), not the traditional CPM (cost-per-thousand based on age and gender). This isn't just semantic nitpicking – it’s about using the correct metric.

We wouldn't use miles-per-gallon to rate the fuel efficiency of electrics cars, would we? Its the same thing: wrong metric, wrong conclusion.

But let's tackle the bigger issue: why addressable TV costs actually have to be lower than traditional TV costs. I'll break it down with a simple example, and I'm even going to bring in a heavyweight economist to back me up.

Imagine you're selling dog food and want to reach women aged 18-49 who own dogs. Let's assume:

• Traditional TV costs $10 CPM to reach all women 18-49

• About 10% of these women own dogs

• Therefore, the effective cost to reach dog-owning women is $100 ($10 divided by 0.10)

Now, here's where John Maynard Keynes enters the picture. Yes, that Keynes. In his "Treatise on Probability," he argued that "economic actors use all available information to make rational decisions." While he probably never met a media buyer, his principle applies perfectly to our situation.

Consider your options as a dog food advertiser:

Option 1: Buy traditional TV at that $100 effective CPM

• You reach your target dog owners

• You also reach plenty of non-dog owners who might someday get a dog

• But you're paying for a lot of viewers who won't buy dog food anytime soon

Option 2: Buy addressable TV

• You reach only current dog owners

• No advertising wasted on non-dog owners

• But why would you pay the same $100 eCPM for this more focused audience?

Following Keynes's rational actor principle, addressable TV should cost less than traditional TV – typically about two-thirds to three-quarters of the conventional CPM. This way, advertisers get the benefit of precision targeting without paying for viewers who aren't in their market.

So the next time someone tells you addressable TV costs are high, feel free to channel your inner Keynes and explain why that's economically irrational. And maybe someday we'll see a conference panel on "What Keynes Taught Me About Media Buying."