New Pricing Models: Why Cost-Per-Engagement Can Benefit Advertisers

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ADOTAS – Most online marketers are aware that CTRs for traditional banner ads have been declining steadily for years (a phenomenon commonly known as banner blindness). Adding fuel to the fire, comScore’s recent vCE Charter study highlighting the fact that 30 percent of display ad impressions are effectively bogus has some advertisers scrutinizing their display ad ROI with an extra dose of enthusiasm.

In response, a growing number of ad networks and publishers have begun offering a new pricing model call cost-per-engagement (CPE). (Full disclosure, my company, Cloud Nine Media, is one of these networks, and we sell our inventory almost exclusively on a CPE basis).

Cost-per-engagement lets advertisers pay only when users “engage” with their ad, rather than paying for every impression served or every click received. “Engagement” in the CPE context can mean different things, but some popular examples of CPE actions include Facebook likes, type-ins, tweets, completed video views or survey responses.

Oftentimes these engagement actions are presented to the user as a way to unlock access to something they want. In Cloud Nine’s case, it’s free WIFi access, but it might also be access to premium content, or virtual credits in a social game.

Networks and publishers that control this access are in a powerful position. Their audience is willing to engage with an advertiser’s message in a very real way in order to get what they want. This creates a fantastic opportunity for advertisers to re-orient their campaign around a particular action that they know drives business value for them, and to escape from the flawed logic that says that display ad CTR somehow gives rise to an invisible “halo” around other marketing efforts.

The CPE model has other benefits too. As David Tokeim, SVP of Media Solutions at SayMedia, explains, “Selling inventory on a CPE allows SAY to sell attention, rather than the potential for attention. Along with providing advertisers accountability, it shifts the focus toward creating rich ad experiences that connect with customers in a meaningful way.”

If you think about it, those sellers promoting CPE pricing do so because they believe that they can deliver genuine engagement at a lower cost or larger scale than their competitors. Maybe they can do this because their format is more effective, or maybe they can do it because they are reaching users in a more relevant context. Either way, if these CPE sellers don’t deliver the engagement they promise, they don’t get paid, which is a great thing for advertisers.

Ari Jacoby, CEO of Solve Media and a proponent of CPE, often describes his company as a performance-based branding company. According to Jacoby, “Clicks are a good proxy for direct response, but cognition is the right measurement for branding. CPE models that guarantee message comprehension will be seen as a last mile solution for branding.”

So how do you use CPE pricing to your advantage? First, make sure that you fully understand the engagement action that you’re paying for. What does it include? Is this action actually going to correlate to increased sales, changes in brand perception, or other business outcomes that you care about? Understanding what you’re buying – including the audience, the context
and the format – is key. What you’re hoping for is that even if users are completing the engagement just to get the access they crave, the experience is still going to leave a mark.

Fortunately there’s a lot of evidence that it will. Cloud Nine’s own brand impact numbers test well compared to a traditional banner impression, and other CPE vendors have great research to share as well.

The era of traditional CPM banner advertising is far from over, though, and if used correctly, these ads can still be immensely powerful. Still, don’t be surprised if you see more and more publishers and networks exploring the higher standard of accountability that comes with CPE asa point of differentiation. Engagement means attention (good), and attention gets results (even better). At the end of the day, it’s those results that will dictate which way the market moves.

4 COMMENTS

  1. Each publisher seems to have a different definition of “engagement” but in the end, attention is finite and if it can be attained through willful means, I’d argue there’s no better planning and buying construct than CPE. I don’t care whether it’s incentivized, during “wait” periods (i.e. between screen loads, game levels, etc.) as long as the user is clear that their attention is being valued and they’ve agreed to share their attention, rock and roll.

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