There are a lot of reasons that CPM advertising can suck. In a post on TechCrunch this weekend, Shelby Bonnie, the co-founder and former CEO of CNET discusses many of them.
Because of CPM’s many faults, he makes the argument that online publishers and advertiser simply need to “kill the CPM“. In other words, go cold turkey on selling ads on a CPM basis. What to replace it with? We’ll figure that out later.
While one can agree with many of Bonnie’s complaints about CPM advertising, advertisers vote with their wallets and for the time being, they’re electing to keep CPM alive. For Bonnie, however, that’s irrelevant. He suggests that we simply need to stop using CPM. Once we do that “the ensuing turmoil will bring creative thinking, new ideas, and entrepreneurial passion“.
Unfortunately, that’s not the way markets work. Where there’s demand, there will be supply and there is demand for advertising sold on a CPM basis. So it’s no surprise that online publishers and ad networks are meeting it.
This doesn’t mean that CPM is perfect or that there aren’t plenty of creative, entrepreneurial people out there trying to find new models that are better. To the contrary: most of us accept that CPM is imperfect and plenty of entrepreneurs have tried to pioneer innovative new ways for buying and selling advertising inventory online.
Yet CPM is still here. Which makes sense when you think about it: CPM is a buying model. It’s not a product or technology. Smart advertisers already understand that there’s more to a buy than looking at the CPM. Just as you probably wouldn’t evaluate beef from two different ranches solely on the cost-per-pound, advertisers don’t look at media buys solely on the cost-per-thousand-impressions.
There are significant differences in CPM pricing between verticals, site categories, ad networks and individual sites. This is a direct reflection of the fact that advertisers know all ad impressions aren’t created equal. Ads can be sold on a CPM basis but that doesn’t mean that advertisers don’t have tools to correlate CPM-based ads to the metrics that matter – clicks, sales, brand recall, whatever. While it’s true that display advertising suffers from chronic oversupply, publishers (and networks) who do their best to over-deliver impressions but who also under-deliver results typically experience the harsh reality of the supply-demand curve.
The bottom line is that you can price ads using different metrics just as you can price products and services in different currencies. Not interested in ‘branding‘? Buy ads on a CPA or CPC basis. Or any other basis for that matter. Yet chances are you’ll still be looking at the same group of metrics, including impressions. After all, if I’m looking for sales, I might buy ads on a CPA basis. But I still need to know how many times my ads are going to be displayed since I would like to project how many conversions my campaign can potentially scale to. On the flip side, I can buy ads on a CPM basis and still calculate the effective CPA of the campaign.
The beautiful thing about the internet is that advertisers and publishers have an abundance of choice and opportunity. If Bonnie isn’t satisfied with CPM advertising and he thinks both publishers and advertisers are getting the shaft, there’s absolutely nothing stopping him from selling his ad inventory in a manner that he thinks is more advantageous. Before we kill CPM, that’d be a good start.