

Let's Kill The CPM (Advertising Model) - petercooper
http://www.techcrunch.com/2009/09/25/lets-kill-the-cpm/

======
mattmaroon
This is silly for a few reasons. For one, click through rate and conversion
rates are not only a factor of the displaying website, they're a factor of the
ad and where the click through lands. For a publisher CPC is therefore often
impractical because they have no idea what that will convert to in terms of
sheer dollars, given that a poor ad will produce far fewer clicks with the
same audience than a good one. (And the distinction between the two is not
always easy to tell without a/b testing.) With CPM you know exactly what
you're going to get paid.

As an advertiser, CPM is fine too because if you're at all competent and do
some basic testing you can build an above-average engagement ad and
effectively get a discount. If your ad produces 10% more clicks than everyone
else, you can bid more to get the same ROI. This is often easier than you'd
expect. I buy all of our Facebook ads via CPM because we've figured out some
great ways to get higher click throughs, and roughly what CPMs you need to bid
at what times for what demographics and keywords to max out your budget as
efficiently as possible.

Also, all advertising is basically CPA-by-proxy so it's not really that
relevant to the advertiser whether they're paying by CPM, CPC, or CPA. When I
buy an ad somewhere (as I frequently do) I may pay CPM, CPC, or CPA, but I'm
simply converting them all into CPA in a spreadsheet because that's the way to
get ROI which is the only thing I care about. If I have to spend 50 cents to
make a buck, I'm ecstatic, but if I have to spend $1.50 I look elsewhere.

If the publisher uses some shady page-view enhancing technique that doubles
page views but doesn't impact clicks at all, that's fine. I just will end up
paying half the CPM (or moving elsewhere) because that converts to the same
CPA in the end. The market values ad slots in terms of pseudo-CPA, so the
publisher can't really boost their revenue in the long run without boosting
the advertisers'.

All shifting from CPM to CPC or CPA really does is switch the party taking the
risk from the advertiser to the publisher. It's pretty easy to see why
publishers don't want to do that. Advertisers really don't want it anyway
because it's harder to budget when you don't know how much you're going to be
paying today.

~~~
kleinsch
You're right that everything is CPA by proxy. I work for an ad network, and
despite selling on a CPM basis, we get evaluated on a CPC or CPA basis
frequently. For performance campaigns, everything gets broken down to an eCPA
for evaluation anyway. Major buyers usually do a small test campaign, look at
the performance, then decide if they're going to do a larger campaign or
reevaluate.

The other example people keep bringing up is branding campaigns, which are a
major source of spend online. I agree that for these there may be no
measurable action, but that's not to say they're fine with any impressions.
The major point for branding campaigns is that site lists, safety, and context
matter so much more. If you're trying to do branding, you don't want your ad
showing up next to pictures of keg stands or negative articles about your
company. Brand campaigns want to be 100% sure that all content will be brand
safe, so they only go to big sources they can trust. This is why most major
branding campaigns have stringent restrictions, usually excluding all user
generated content and long tail publishers. The big branding campaigns are
paying $10-20 CPM, but they're buying it on NewYorkTimes.com and ESPN, not on
your blog or social media invention.

------
petercooper
For what it's worth, much of my income comes from the CPM model yet.. I agree
with this piece, but it flies in the face of the "Chinese Wall" ethic (between
editorial and advertising) in the publishing world.

I run a popular(ish) programming blog that sells advertising. I suspect that a
very healthy CPA would encourage me to provide a better service to readers and
advertisers alike as I'd need to ensure the way the advertising is integrated
is appealing and useful (otherwise I don't earn anything). But some readers
(and many journalists) would scream at the falling of the
advertising/editorial barrier, even if I tried to remain as ethical as
possible (disclosure, etc).

------
vaksel
killing CPM will pretty much kill the content providers. People are more or
less ignoring ads at this point, so the CTRs and CPAs are tanking.

Let's say you have 500,000 users, and each gets 10 ad impressions a month.
Let's be honest, 500,000 users is a LOT, that's more people coming to see your
site, than most local broadcast stations, yet they really don't make you that
much money.

That's 5,000,000 views, at CPM of $2, that's $10,000 a month.

If we used that same 5,000,000 and switched to CPC, we'd get a CTR of about
.1%. So that 5,000,000 views would net us 5,000 clicks. Let's be generous, and
say each click is worth 50 cents. Bam, you only made $2,500. So your income
has just been cut in 4. And that $2,500 will twindle since ads don't really
change, so a user will only click them once.

If we used the same 5,000,000 views as CPA, the result will be even worse.
People just don't like pulling out a credit card(at least not without checking
other sites for a better deal). If your CPA is 1 action per 25,000 views, and
you get $10 for each transaction, that's $2,000 worth of revenue. Bam your
original $10K has been cut in 5. And remember, you'll need to find brand new
offers every month, since the ads will get stale.

With an income of $10K/mo, you can focus entirely on your content, but with
only $2,000-$2,500 you have to go pick up a 2nd job.

This proposal is probably a good idea for big sites like CNET, since that
would kill all the smaller content providers and drive them out of business.

~~~
ujjwalg
You are looking from the perspective of the owner. Look from the perspective
of the user. This will really filter out the best websites and no one will use
over-the-top headings, bait and switch tactics to gain more impressions. There
wont be much duplicates of the same stuff and things will be so much easier to
find on the internet. Yes, it will make crappy site owners die, but they
should anyway. It will also make targeted ads more popular.

~~~
vaksel
So how exactly will duplicates go away by getting rid of CPM?

Killing CPM will actually make it worse. Right now I can put the CPM ad
anywhere on the page, without interfering with the user. But if CPM dies, I'll
need to make sure that people are clicking on the ads. That means they'll be
much more prominent. And let's not forget, with the death of CPM, we'll get a
ton more of those full page ads that hijack the screen. If you think the user
experience will get better without CPM, you are mistaken.

From the advertiser perspective, sure CPM isn't that good, compared to
CPC/CPA...but it's a crapload better than traditional advertising. A $250,000
New York Times Ad will get your ad in front of 1.5 million people. That same
$250,000 will get you 25 million page views(at $10 CPM)

------
blhack
I'm going to have to kindly disagree with this.

Some people don't seem to understand that advertising is also about _brand
awareness_. I've seen that damn "evony" or "ebony" or whatever it is free
mmorpg ad all over the place, but have never clicked on it.

I'm sure that, eventually, I will check it out. This isn't because of ONE
website that I have seen the ad on, it is because I have seen it _everywhere_.

The value (at least in some cases) is in LOTS of impressions. The CPM model
will probably never die (and IMHO, this is a good thing).

~~~
jwesley
You are missing the point. CPM != Brand Awareness. The author's main point is
that paying for impressions leads publishers to drum up loads of garbage
impressions. If there was a better way to measure and pay for brand
engagement, then publishers would be incentivized to increase that.

------
ugh
Digital marketers in Germany are saying exactly the opposite at the moment.
CPA and CPC kill the advertising market. They say. Media agencies flat out
don’t seem to believe that impressions are worth anything. The only look at
conversions.

The marketers don’t like that. Firstly because that obviously makes them look
bad (impressions >> conversions). Secondly because there is arguably something
to a branding effect. Just displaying ads could realistically have an effect.
And it seems pretty impossible to measure such an effect in many cases.

That whole discussion among German online marketers even leads to batshit
crazy arguments (Well, one marketer. Any more and I would lose my faith in
humanity.) about making display ads non-clickable.

------
hooande
Does anyone think that more relevant or interesting ads are a good solution?

I agree that CPM is broke. People really don't like ads, as evidenced by the
popularity of AdBlocker. Paying to show people a _lot_ of something that they
hate doesn't make a lot of sense.

------
eli
CPM is the right approach for a branding campaign. If you're trying to
generate sales leads then, obviously, CPL (cost per lead) would make more
sense for you.

------
dotcoma
yeah, let's kill the CPM, and smoke dope. What is your proposal, dude?

