Forget CPMs, You Should Be Transacting On Time
Publishers weigh in on the FTs cost-per-hour ad pricing model.
Impressions have never really been a perfect metric for measuring digital ad effectiveness, but CPMs have stood as the industry standard with a dearth of alternatives.
While watchdogs are attempting to solve the problem by cutting through some of the haziness around viewability standards, the Financial Times is pioneering a new way of charging for digital display inventory altogether with its cost per hour model. Working with Chartbeat, the FT’s program officially went live this week.
A limited pilot program with 10 buyers last fall generated more than $1 million in revenue, and led to improved brand recognition and association among readers, ensuring 100 percent viewability for at least five seconds, the FT says.
The program comes at a time when publishers are actively looking for ways to redefine their value to the ad community, and time spent—a more reliable indicator of reader engagement than views or clicks, many say—is one of the options on the table.
In fact, more than half of the industry believes time-based metrics will replace many of the traditional stats used in ad sales, according to a survey by Digital Content Next. Moreover, 20 percent of respondents were already testing time-based sales initiatives or had plans to do so in the immediate future, as of Oct. 2014.
But while most publishers agree that transacting on the basis of time, as opposed to clicks, is worth exploring, they acknowledge the difficulty in convincing the buy side to change. At the very least, pricing structures still have to be worked out in the market.
“In concept, CPH makes complete sense. Media and marketers should work together to create an environment where the marketer can convey a message to the visitor, rather than just serve an ad and hope for a click, which is often inadvertent,” says John Lerner, CEO of Breaking Media. “The challenge will be when the media buying community pushes back on price. Their metrics are CPM and click-through percentage, and they inevitably fall back to those when looking for better prices, whether it is a direct or programmatic buy.”
That’s where the FT’s claims about higher recall rates will likely come into play—the company says tests have shown up to 50-percent higher recall and familiarity when ads are viewed for at least five seconds. Ultimately, if CPH has any hope of supplanting CPM (or at least existing as a viable alternative to it), it’ll have to show return for advertisers.
“The Financial Times’ move is smart. We'd love to charge advertisers by time,” says Rich Sutton, CRO for the Reader’s Digest Association. “The key to making this successful is that advertisers need to see a significant return on their investment.”
“We are believers in engagement based ad models,” adds Matt Minoff, vice president of ad platforms and operations for Meredith, “however, we want to keep in mind that engagement is only a proxy for our clients’ ultimate goals of brand and sales lift.”
The base unit of the program—hours—will also need to withstand scrutiny, especially from publishers without the massive scale of a publisher like the FT. It takes 720 views of at least five seconds to equal one hour.
“In the rapidly evolving world of digital advertising innovation is key and any new measurement criteria which can potentially increase revenue should be reviewed,” says Joe Landry, executive vice president of publishing for Here Media. “[But] CPH is a generous term since the unit of time consumers view ads is in the seconds not hours.”