The beauty of online marketing is, if used properly, results can be measured.
For every dollar spent, we can track revenue. If not revenue, at least other metrics (sign-up pages, landing pages, e-mail, etc.) can be measured. With that information advertisers have instant access into what is working and what is not. The results are quick and clean.
However, CPM (cost per thousand impressions) does not allow for that measurement.
I do not understand the advertising model that says “Let’s confuse and annoy the consumer enough, so they will buy.”
This “turning away”, has led to a low return on investment on banner advertising.
Its mass marketing and that does not work.
There are discussions that the CPM model may be saved with behavioral targeting. The theory is consumers are only annoyed by advertising if the product is something they do not want or need. If it is a product in common with their surfing habits, then the advertiser has provided a service to the consumers by making them aware of the product
However, there are still holes in the execution of behavioral targeting. Until that is resolved, CPM pricing is not a wise investment.
Google is also aware of this shift away from CPM. They are beta testing the CPC (cost per click) model on site-targeted ads, which has long been a CPM model.
According to Google:
“Until now, site-targeted campaigns were available only with cost-per-thousand-impressions (CPM) pricing. Now when you create a new site-targeted campaign, you can choose to price the ads using either CPC or CPM. If you choose CPC bidding for your site-targeted ad, your account will be charged each time a user clicks on your ad. You won’t be charged for each impression. If you choose CPM bidding, the reverse is true: you’ll be charged for each impression, but not for clicks.”
Online advertisers need to evolve past the CPM model. It’s a dead solution.
As CPC and more importantly CPA (Cost per Action) improves, more and more advertisers will begin jumping off the CPM ship.
July 29th, 2007 at 1:30 pm
Terrible analysis. CPC (and especially CPA) are harder to measure from the publisher’s point of view.
Most importantly, deviating from CPM means publishers give tons of FREE ADVERTISING to advertisers in the form of valuable impressions, increasing product/name ID. Publishers increase market awareness of these products, and have delivered a service whether or not there is a “click.”
Finally, CPA/CPC punishes the publisher for the shoddy marketing of the advertiser. A crappy banner or ad copy isn’t the publisher’s fault, but they receive less revenue because the ad is less enticing. This zero-risk advertising is fundamentally flawed, and doesn’t take into account the loss the the publisher in terms of opportunity cost.
Can you imagine if Ford decided not to pay CBS because “no one bought our cars after we ran commercials on your network” ??? Absolutely absurd. Saying that CPM should be abandoned embraces the same underlying assumptions of that absurd example.
July 29th, 2007 at 1:46 pm
Jack,
I am not sure if I understand your logic, so please correct me if I am wrong.
Are you saying that advertisers should continue using CPM advertising because it’s good for the publishers? Why would an advertiser spend their limited available funds to trying to make the publishers happy?
As far as your analogy with Ford and CBS goes, I am not saying Ford should not pay CBS. However, I am saying Ford should not advertise on CBS, if the commercials do not return revenue.
-John
July 25th, 2008 at 3:47 am
I think your analysis for CPM model are logical but for the advertiser point of view only.If you think it from publisher point of view then the analysis are not logoical.
August 6th, 2008 at 2:55 pm
Hey John,
We completely agree with you. That’s why we developed an alternative to the CPM and CPC model that is focused on helping smaller publishers connect with advertisers who use their site.
We’re creating a market system for advertisers and publishers to find a balance between both their needs.
Please take a look at http://www.anatomyads.com. We’d love to hear what you think.
Craig
August 9th, 2008 at 2:28 am
CPA isn’t the only way to earn money online: Sponsorships are possible, too.
This mashable post from a June 2008 provides some background info on the thinking:
http://mashable.com/2008/06/20/sponsorship/
@Craig Higdon mentions Anatomy Ads. It looks like they have a well thought out sponsorship widget. I like the idea of sponsors competing for impressions over a 30-day time period. This forces advertisers to place higher sponsorship amounts in order to receive proportionally more impressions.
This sort of feels like a new model. Something along the lines of Cost Per Duration or Cost Per Time, maybe? I haven’t been able to track down any other alternatives to CPM/CPC/CPA except this. Are there any other solutions out there?