Is It Time To Sunset The CPM?

Data-Driven Thinking” is written by members of the media community and contains fresh ideas on the digital revolution in media.

Today’s column is written by Tom Pallack, CEO at SITO Mobile.

It’s no secret that legacy media models are under siege. Perhaps nowhere is that more obvious than in the world of media buying and planning – and the impression CPM.

Given that marketers have more data, screens and channels at their disposal than ever, plus sophisticated attribution and media-mix systems that track specific channels to determine campaign ROI, media practitioners’ continued reliance on the CPM seems particularly outdated to me.

In a data-first world, the traditional CPM is no longer relevant and may even be an obstacle to achieving marketing effectiveness. I predict that savvy marketers across sectors, including filmed entertainment, casual dining and retail, will jettison the CPM and embrace a performance-based strategy that takes into account data from myriad sources – offline, online, location-based, etc. – and uses rigorous analytics that help them better understand their marketing ROI.

Take the movie business, for example. Major studios evaluate performance based on box office sales and in-theater attendance. Studios have only one shot at opening day and tend to spend a lot on marketing in the very short amount of time leading up to a new release. On opening day, studios can learn whether people who were exposed to promotion for the film actually wound up in the theater. Connected to online and offline media exposure, this real-world behavioral measure is powerful and speaks not only to the advantage of paying for performance, but media-mix attribution and omnichannel marketing.

Similarly, a national restaurant chain often pays for media based on the cost to acquire new customers. Viewed through a performance lens, the chain might see a spike in verified, walk-in traffic that attracts both new customers and reduces acquisition costs. In this case, “verified” means those who were exposed to advertising and were validated as entering a store location vs. those who weren’t exposed to advertising. A performance model would use data to inform the marketer which messages helped drive consumers to dine.

Using performance metrics to capture full-funnel ROI will lower acquisition costs and grow sales. Sectors that have shifted to performance enjoy increased advertising and marketing effectiveness. The CPM is the lowest common denominator for marketing impact and perpetuates much of the unintentional fuzziness around marketing. And it may, to some degree, perpetuate intentional aspects of digital media that are fraught with fraud or the use of proxies for viewability.

It may take some time for marketers long accustomed to the CPM to start paying on performance. However, an increasing awareness of impression fraud and media environment quality issues driven by the race to ever-lower CPMs will hasten the process. Other measures, such as cost per acquisition, are already starting to dislodge the CPM.

I define performance metrics as any standard of measure that aligns with business goals, such as increased store foot traffic, sales or even increased brand metrics like brand awareness. The challenge is connecting the data dots between business results and the advertising and media. While it’s a long and continuous journey for most marketers to get to this point, it’s achievable.

Marketers have little to lose by adopting a performance marketing strategy for the simple reason that the impression CPM doesn’t serve the marketer very well. The massive scaling of digital impression CPMs has created the unintended consequences of ad fraud at worst, and ineffective marketing at best. Applying TV media reach and frequency metrics to digital media is bad idea.

Brands that rely on immediate consumer impact and fulfilling needs on demand will continue to be in the vanguard of performance marketing. But nearly every category of business has an on-demand aspect today, and the performance lens can go wide and specific, unlike the CPM, which offers a messy and incomplete picture. The CPM serves no category well.

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1 Comment

  1. Ron Stitt

    The gap between blogs and panel remarks about advanced advertising/media buying and the way the business actually goes down is gigantic. In the end only CPM (read: cheap) impressions usually matter, and you are right that is THE main cause of all that ails digital advertising. Change will not be easy though as the level of inertia and vested interests in the status quo are daunting. Only the people who have final say on expenditures can drive this…CMOs, that means you.