InsightIQ Blog

Kill the CPM, not the messenger

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Sep 25 2009

At the conclusion of Ad Week, Shelby Bonnie, former CEO of CNET and Chairman of the IAB, makes a bold statement. The CPM model is flawed. Now that Shelby is no longer beholden to his stockholders it's time to kill the CPM...before of course, it was almost time but not really because CNET was already in trouble and struggling to sell a whole bunch of new brand format ads to make the internet seem more like television and keep the CPM alive. While I actually don't disagree with his logic...especially the part about there being no natural constraint online as there is with tv, print, and radio causing impressions to be essentially meaningless these days...he offers no real solutions in his scathing assessment of this enormous industry crutch. 

Dell was pushing a CPA model online in 1998. But then, they could. They were already doing it in print and could track ROI on every cent down to the last config line. It was a beautiful thing.  But times have changed and so has online content consumption. And not all business models can support a CPA-based pricing structure, nor is it appropriate for content publishers or non-transactionally based information exchange. 

As Shelby admits, the industry is infrastructurally invested in the CPM.  This is absolutely true.  We see it every day with our own media clients.  Senior execs understand that targeted buys are more effective than volume-based spend but there's no scale and the internet is a multi-functional sales funnel.  It's a branding vehicle, it's a transactional tool, it's everything. 

I still believe the CPM model can work, but not as a one dimensional measure of value.  Sheer impressions alone are meaningless without the context of user engagement.  Perhaps once there is a standard definition for engagement, we can begin to shift the paradigm to include not just reach but a notion of qualified reach and value. In my opinion, that does not include increased investment in third party ad networks, as the most recent article in eMarketer suggests. 

Even in this highly adaptive channel I think we're at least 3-5 years away from a standard value-based pricing structure. In the meantime, the onus is on the advertiser to demand proof of audience quality and negotiate pricing terms that support channel effectiveness. 

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