So how about some new pricing models?

Of late I’ve been thinking a lot around the pricing/sales model for digital media.

Ben Millar from UM (who has been helping me a lot in terms of trying to develop thoughts around this area – thanks mate) made a comment today and linked to this recent article in AdWeek that also addresses the issue –

It touches on the concept of a Cost Per Engagement model.

Right now seems to be a good time to be re-thinking the approach to pricing and sales.

See, we always use the line that ‘digital is like no other media’ and it truly interactive and the like … but most display advertising is sold in a manner no different to ‘traditional’ media – CPM.

And reporting wise we don’t get much depth if any from the publishers. Impressions, clicks – great …

Ask a publisher to tell you WHO exactly saw your ad and they won’t be able to tell you. Most advanced measurement has been pushed through agencies but the problem is with this measurement is rarely can we tie it back to pricing and adapt in real time – yes, we know how many interactions/actions/conversions etc we get (no issue with depth of data) … but the pricing model when buying and optimising media doesn’t really take this into consideration.

 Effectively, it’s somewhat of a mystery who exactly sees your ad and how many of them fall into the target once the diligence of the buy and planning have been completed and the campaign goes live. Once the ad goes live reporting is limited to more macro elements – clicks, conversions, interactions, post view, post click … it is difficult to dive into the data and carve it up dependant on profiles or demographics.

Case in point. If I do a campaign on facebook or myspace do I receive reporting broken down by demographic/interests? No way … you get clicks and impressions. But surely this could be deeper given every user is registered … and wouldn’t it be such richer data with this layer added?

So, this medium is positioned as unique, different … but in many ways is exactly the same as the media we’ve had for decades. Measureable – kind of. Accountable? Erm. Lets say measureable.

Problem is, it’s not … we all know the potential of digital goes beyond just straight exposure or response into areas that are tremendously exciting.

But right now we have CPM or CPC (or CPA). CPM = fixed cost per 1,000 imps. CPC = fixed cost per action.

We also have Ad Networks such as Drive and Adconion who are using technology to develop more information about users and ideally increase ad relevance so they can zero in on these users. The networks have real potential – combine contextual relevance with robust data and you can generate some powerful results. Add greater depth of allowable executions and they become very appealing.

I found this article when looking around today for more info on the area –

Tania from Video Egg made a comment on the post.

“Until now media has been bought based on context and CPM as opposed to user desire and performance. There was no guarantee that users on the sites will actually pay attention to the ads. So how do you measure if the ad has been sucessful if the pricing mechanism is not geared towards advertisers but publishers selling inflated inventory?”

Interesting point. Who is the pricing geared towards in AU and how much effort is being made into generating the best possible ad executions?

Ad Ad-Tech I made a comment that I thought publishers were potentially short changing themselves and their role by just selling eyeballs … what they need to move towards is selling a connection with a user. This involves a lot more than just flogging squares and rectangles and means they could play a role in terms of insights, research, idea participation and analysis.

Ask a site to justify its CPMs and you will get 1 thing – a heap of Morgan data showing they have x% of ABs and y% of new car intenders and z% of university qualified professionals and about 10 other broadbrush statements that more often than not don’t help you. Problem is, this information doesn’t demonstrate how they have a deeper relationship with the reader and the benefits you, as an advertiser, can achieve as a result of this relationship.

And that is where true value lies surely. Not in the fact 57% have a managed fund and plan to take an overseas trip in the next 6 months.

I am a huge believer in the power of context but believe the cost of this needs to be in line with the benefits. As digital departments become irrelevant and agencies truly integrate there is pressure for digital as a medium to come into line somewhat with the rest of the communications mix. Yes, we know ‘digital is different’ but at the end of the day most ATL media channels are effectively different to one another.

And maybe, this opens up a new range of pricing models and a move towards more partnership between agencies and publishers to develop the most relevant executions for each placement.

Some thoughts I had were:

– cost per interaction (rollover)
– cost per lead (ie fields being filled out)
– cost per exposure (is there a way to see whether someone has had the ad appear on their screen? relevant considering the length of webpages and amount of ads below the fold)
– cost per stream
– cost per unique user
– variable CPMs depending on day part
– cost per visit with short post view window

Would agencies and advertisers be willing to pay for deeper insights into user habits of networks like ninemsn? I think they would be. Or work with a Facebook to develop a market research initiative that wasn’t lame? Absolutely.

And a cost per engagement type approach might mean we rid our sites of ad placements that are virtually hidden – there wouldn’t be a need for them and the emphasis would be on generating impact but doing it in a way that doesn’t piss off users. And it might open up the allowed specs so we can have more fun with transperency’s, floating, expanding and video ads.

Not at all saying these are definitive answers but I think the direction isn’t that far off. And it moves us all closer in line with the concept of fostering ideas and connections, not selling/trading commodities.


4 responses to “So how about some new pricing models?

  1. Well there’s this trivial matter called “Privacy”.

    Frankly, I don’t want advertisers to have the sort of access to the data you’re suggesting. What kind of data do you really require?

    What does WHO mean?

    “Well this report clearly shows that 54% of people who saw your ad were blonde divorced men who are 54 and 3 months. 18% of those were pretending they were 22 so that they could mack on 18 year old girls on facebook, who were actually lying about their age, and were 48-year-old brunette women that owned two cats, both called Mr. Fluffykins. We were also able to dig up some good numbers on the kleenex matrix, suggesting at least 00:05:23 wank session whilst that ad was displayed – on average”.

  2. talkingdigital

    “the kleenex matrix” – i lol’d!

  3. Ben -great post, i totally agree with you on the new cost-per-engagement model…

    Trojan Whore (?): i think you might be going slightly overboard by comparing cost-per-engagement with big brother-esque privacy issues.
    Tracking ad rollovers, game plays & ad exposures it not quite the same thing as understanding whether or not a 48 yr old brunette woman with 2 cats named Mr Fluffykins was indeed one of those wanking within your Kleenxex matrix whilst interacting with a credit cards advertisement….

  4. gone will be the days of post view conversions and ‘the man with the biggest reach is most likely to get the last cookie’.

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