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How The Cost-Per-Engagement Ad Model Could Soon Replace CPM

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If nobody pays attention to an advertisement, it’s not going to work very well for the advertiser. That’s not exactly news; TV advertisers learned long ago that they need to make their ads entertaining before they can be effective. Provided advertisers do this, though, the community as a whole remains fairly confident that TV ads still have a strong ability to capture attention and ultimately change perception and behavior at a national scale.

The story is different on the internet. Because the selection of content online is so vast, web surfers have learned to be very diligent about guarding their attention. They spend a lot of time online, but they do it in a much more active way then they do when watching TV. Every 40 seconds, on average, they process an entirely new page, full of thousands of words, links, images and ads. For this reason, the online audience has less patience for advertising that doesn’t help them achieve their immediate goals (like search ads arguably do). If they paid attention to every ad they saw they wouldn’t really get very far.

This overwhelming scarcity of attention online makes it difficult for brand advertisers to engage users long enough to alter perception, create associations, generate awareness and achieve all the other goals that TV is so good for. The frenetic pace of internet surfing also makes it difficult for most online publishers to deliver meaningful levels of engagement to advertisers. This dynamic holds true for giants like Facebook (who still struggle with frighteningly low ad engagement rates) all the way down to the tiniest personal blog. Not surprisingly, even though our time spent online is now roughly the same as the time we spend watching TV, marketers still put twice as much money into TV advertising.

Crowd Watching ComputerThe reality is that in the face of so much competing content online, most online publishers struggle to maintain a solid grip on their audience’s attention. The content they serve is easily available elsewhere. Switching costs are basically zero. This makes it very difficult for them to carve out meaningful amounts of attention and sell it to advertisers.

Yet, as the quality of content and services online continues to improve, a subset of publishers begun devising new ways to harvest and process attention and reverse the trend of declining ad engagement. Online video networks are using the draw of top-shelf programming to demand up to nine in-stream ad placements per program. Social gaming networks are surveying users or trading Likes in exchange for virtual credits. Location-based networks are trading free WiFi access in exchange for 45 seconds of captive ad engagement. [Full disclosure: The author is CEO of a location-based network]

What all of these formats have in common is that a) they restrict access to something the audience really values until the required amount of attention has been given (hence the label value exchange) and b) they demand greater amounts of attention from the audience than do traditional display ads. This trend is a great thing for advertisers, since it creates lots more opportunities to buy the attention needed to change perception and behavior.

More importantly though, many companies focused on these high-engagement ad formats also offer cost-per-engagement pricing in order to back up their claims. Under the cost-per-engagement model, if the audience doesn’t engage with the advertiser’s message in the agreed-upon way, the publisher doesn’t get paid. The CPE model creates a strong incentive for publishers to deliver real attention to advertisers – attention that’s necessary to drive meaningful changes in perception. No more plastering 10 ads on a page and calling each one an impression.

By offering CPE, value-exchange based publishers are basically saying “Hey look at us. We can actually get a premium audience to spend time and engage with your ad, we can measure this in all kinds of ways, and we’re only going to charge you for real engagement.” It’s stark contrast to the incumbent, CPM model.

One response might be that you only care about clicks and immediate purchases, so CPC and CPA is really all that matters. Another might be that the CPE providers you’re talking to can’t deliver the audience you want (though that’s becoming increasingly unlikely as the web matures). Still, if your goal as an advertiser is to make sure people have heard about your product, that they feel a certain way about it, and that they remember your brand come purchase-time, then it could be time to stop buying the potential for engagement with CPM placements and start just buying the engagement.

Image: Crowd Watching Computer from Shutterstock; Confusion — Original Billboard Image from Shutterstock

About the Author

Sebastian Tonkin is the Co-Founder and CEO of Cloud Nine Media, a WiFi advertising and sponsorship network serving millions of users in thousands of airports, hotels and cafes nationwide.

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