South African publishers are facing increasing pressure from advertisers to adopt a pricing model based on the clickthrough rate on banner ads, rather than the more traditional CPM (cost per mille or cost per thousand), pricing model, which is based on a fixed price for every 1000 impressions served.
CPC, or cost per click, is a performance-based pricing model, in which the advertiser is charged only for the number of clicks an ad delivers. The model was popularised by search engines such as Google.
Recent research
A recent Research Note by Eyeblaster* cited a survey by Econsultancy and the Rubicom Project, noting that 63% of publishers still price display advertising using CPM, but that CPC has been gaining steady ground over the past five years, with as much as 30% of publishers having already made the switch.
The report, interestingly, suggests that the CPC pricing model could well undermine the viability of online content providers that in turn could affect the pricing of online advertising, which should go up as quality inventory declines.
The Eyeblaster* Research Note argues that the CPC pricing model doesn’t translate effectively beyond search engines. It’s fine to implement a CPC system when you have volumes on the scale Google does (it generates several billion searches a day), but few sites enjoy such volume and, in any case, content sites rely on display advertising (eg banner ads) to monetise their audience. Advertisers link the success of display advertising to clickthroughs, which in turn is reliant on a number of factors outside the control of the media owner, including advertising creative and call to action, which needs to convince users to click on an ad.
“Compensation at the mercy of others”
“When publishers are paid by the click, their compensation is at the mercy of others in the advertising chain who make decisions that affect the success of the campaign,” says the research note authors. “Another concern is whether clicks are the proper metric for discerning the success of a campaign. In many verticals, the actual purchase is made in off-line stores, and therefore the value of the ad is in its retention rather than the click.”
“On the face of it, CPC sounds like a far better scheme for advertisers- publishers only ‘eat what they kill’, and therefore share the risk with the advertiser and marketer,” the Eyeblaster* report continues.
“This research argues that CPC payment schemes are not only impaired because of inequitable allocation of incentive and risk, but also that the spread of CPC may curtail the growth of the display advertising industry. In addition, by linking publishers’ pay with success that they have only partial influence on, CPC may drive some publishers out of business, causing an increase in media prices and as a result driving some advertisers out of the market as well.”
Read the full story on BizCommunity.com
*Please note that Eyeblaster rebranded to MediaMind earlier this year.
Anon.~ Money talks…but all mine ever says is good-bye.