"Data-Driven Thinking" is a column written by members of the media community and containing fresh ideas on the digital revolution in media.
Joshua Koran is VP Digital Product Management, Research and Data for AT&T AdWorks.
Much has been written about the "viewable impression" metric, which banishes impressions that go unnoticed by consumers. It relies on client-side code to track a user's interaction with the browser scroll bar, attempting to measure whether below-the-fold ads ever show up on screen during a page impression. (It also looks at whether ads render at all or are obscured by other page elements.) While transparency always helps reduce market inefficiencies (and exposing the ad location helps buyers better evaluate and sellers better differentiate their inventory), this still doesn't provide direct marketers metrics of success, including increased brand awareness, consumer interaction with the ad, or even click-through or conversion rates.
Many viewable impression tracking companies are urging media buyers to use their metric as currency for paying the media seller. These companies propose that advertisers who purchase inventory according to a viewable cost-per-thousand (i.e. vCPM) will increase their ROI, while publishers who sell inventory according to this new metric will increase their revenue. By charging only for viewable inventory, the publisher can command higher rates than they do today. Unfortunately, these claims ignore simple math.
Imagine a publisher charges $5 to serve 1,000 impressions of an advertiser's campaign, but only 750 of those impressions are "viewable." Under a viewable impression billing plan, the advertiser would be charged 75 percent of the normal cost for 1,000 impressions (e.g., $3.75 vCPM). Since the remaining unviewed impressions aren't worth anything to a media buyer, the publisher would earn just 75 percent of what they received before. Alternatively, the publisher could try charging $6.67 for the viewable impressions to maintain their current revenue, but this model wouldn't lower costs for media buyers and would only further complicate the transaction process.
While the viewable impression metric does not benefit sellers, the media buyers aren't any better off either. How is that possible?
Assuming negligible costs to identify which impressions are viewable, it seems that the media buyer would benefit from paying for inventory according to a vCPM model. However, there is an important aspect of vCPM that viewable tracking companies ignore: risk.
Today, media buyers absorb the risk that their partners will deliver their campaigns to the right audience, at the right time, and in the right context. Being viewable is part of the context portion of the equation. An ad served at the bottom of the page is less likely to be viewed than one at the top of the page. Because the media seller cannot know whether the user will scroll down the page, the price charged to buyers would need to account for the percent of impressions that the seller serves, but the buyer will not pay for. Thus, our original $3.75 vCPM would need to increase to account for the risk of impressions that consumers do not see.
Since predictions are not perfect, media sellers are likely to pad their estimate to cover the margin where they do not guess correctly. This not only reduces the control a media buyer has over risk, but this price increase would also lower the ROI an advertiser earns from their media spend. Accordingly, using viewable impressions as a currency for pricing simultaneously reduces revenues to publisher and ROI to advertisers. Introducing the viewable-impression metric adds both complexity and cost. Given the increased expense to buyers – and decreased revenues to publishers – it would be imprudent for the industry to switch to this metric as the new currency for digital advertising.
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