CPM, which stands for Cost Per Mille (Thousand), has reigned as a measurement standard for digital ad sales, pricing, and results for two decades now — but one major publisher has spearheaded a move toward a more efficient and meaningful model. The Financial Times, in collaboration with Chartbeat, has adopted a new “time-based currency” known as Cost Per Hour. Let’s take a closer look at what promises to be a major shift in ad sales and revenue measurement.
A Smarter Strategy for Advertisers
CPH measures the length of time readers are viewing ads by the hour, assuming a viewing duration unit of five seconds. Advertisers pay only when their ad accumulates one or more hours of verified viewing time. This helps guarantee that the ads are not only being glanced or clicked on but genuinely studied by readers.
If CPM was the industry standard for so many years, what’s wrong with it? According to a white paper by an independent consultant, CPM and its cousin CPC (Cost Per Click) simply don’t tell advertisers very much about whether viewers are actually engaged by the ad content. CPM’s susceptibility to fraudulent or meaningless impressions/clicks as well as low viewability scores. It’s also a highly inefficient way of generating revenue, with less than one click-through per 1,000 impressions.
The Financial Times bases its new system on the lure of higher recall rates, claiming that that brand recall and familiarity jumps by 50 percent when readers view ads for at least five seconds. The CPH model also includes methods of measuring duration of views, helping to ensure 100 percent viewability for those critical five seconds. This kind of “brand lift” is highly desirable for advertisers because it helps them overcome the flakier aspects of old-fashioned CPM.
CPH seems to work. The Times ran a 2014 pilot program involving 10 major buyers (including IBM and BP) that generated over $1 million in incremental revenue. Brand recognition and association both rose, generating excitement across the board for this new online advertising model.
The New Standard for Publishers?
This new revenue model is certainly not going to be exclusive to the Financial Times — not if the Times has anything to do with it, anyway. The publication is already working with other publishers to help them get acquainted with the CPH concept and reorganize their own ad inventories accordingly. It is hoped that the success of these early efforts will spur an industry-wide shift away from CPM. Those hopes are likely to be fulfilled; a recent study indicated that 80 percent of the publishers surveyed were intrigued enough to give CPH serious consideration as their future “go to” digital advertising model.
This shift actually holds special advantages for publications with less-than-gigantic audiences because it emphasizes quality content and reader engagement over a sheer volume of incoming traffic. Specialized trade publications with “niche” readerships may find that they can reel in more ad revenue and compete with bigger publications more effectively as a result. While an hour of advertising time at 5-plus seconds per view will call for at least 720 views, any publication whose readership can support that base level should find the CPH model a workable one.
Keep a close eye on the immediate impact and adoption rates of CPH. You could very well be looking at the next great industry standard for digital advertising — one that can benefit both advertisers and publishers just like you.