$5 CPMs. Are We Looking At The Future?

We all knew that CPMs were heading south. But we probably didn’t think we’d be seeing $5 CPMS for the New York Times dot com quite this soon, did we?

Is this the future?

If so, publishers will need to quickly start finding additional revenue streams outside of impressions. The problem? Media agencies write their media plans in terms of impressions.

And selling these media plans is how media agencies make their money.

Impressions work quite well for a media agency’s bottom line. But impressions are not working as well for an individual publisher’s bottom line.

So what can be done?

First, stop and think about what impressions actually measure. What they measure is what happens “outside the commercial.” Impressions measure placement, and, to a degree, awareness.

Today, publishers also have data regarding what happens “inside the commercial.” This data tells them the amount of time that viewers spend with the commercial. Where and when they rewind. Pause. Fast-forward.

Where viewers lose interest entirely and leave the commercial.

The data that shows what happens inside the commercial is probably more important to an advertiser than what happens outside the commercial because it’s data that indicates what is happening as the consumer moves down the purchase funnel.

Impressions are about awareness. Awareness sits at the top of the purchase funnel. The data that shows what happens inside the commercial is about interest, and, depending on how well the spot is written, consideration.

Interest and consideration are what develop as we move down the purchase funnel.

That's why it's this information, rather than impressions, that actually offers insights as to a commercial’s effectiveness.

If so, then this data can start to offer publishers a way to deliver a different value proposition — based on a new currency – the currency of effectiveness, rather than impressions.

Back in 2007, we labeled it The Currency of Creative.

And, the fact is, we need it now more than ever.

After all, the current currency, based on impressions, is fragmenting. Like a small crack in your windshield, it’s only a matter of time before it’s completely shattered.

$5 CPMs tell us it’s happening faster than anyone thought.

Which means that if you're a publisher, you should quickly be figuring out the answers to two very important questions.

1. Do you have an "inside the commercial" data strategy?

2. How will you sell your "inside the commercial" data to advertisers if not through your Media Agency?

Engagement vs. Impressions

And so, the debate continues.

There was a nice point of view on the issue written by Joe Marchese this week. The key line from his piece was as follows: “There is a seemingly infinite number of “impressions” available for brands online, yet any idiot can tell you that there is not an infinite amount of consumer attention available for brands in any medium.”

Joe goes on to say, “Publishers can create “impressions” simply by adding ad units, but adding ad units don’t magically increase the amount of consumer attention in the world. What publishers have that is of value to brand advertisers is consumer attention. In order to prove valuable to brand advertisers, publishers must find a way to share their audiences limited attention with marketers in a FAIR exchange of value.”

Well put, Joe.

And yet, the problem that everyone seems to raise is how does the industry go about measuring engagement? I don’t know how to answer that.

But I do know how we can measure attention. When someone clicks on something, or opts in to it, their attention can be measured through the amount of time spent before they click away.

The word “engagement” complicates the process because it means different things to different people. For many, engagement has a depth to it. One can be deeply engaged or slightly engaged. Attention, on the other hand, is more of a surface measurement. You can pay attention but not be engaged. But you cannot be engaged without paying attention.

So instead of trying to measure the psychological aspects of engagement, what if we just started with attention? Attention is like a cab ride. When the cab starts moving (or the video starts playing) the meter starts running. You tell the cab where you want to stop. At that point the meter stops running.

Attention can be measure through time spent, just as a cab’s meter works off distance. It’s a very simple measurement.

That said, even if we could all agree to start discussing attention rather than engagement vs. impressions, we are still nowhere near solving the problem. The reason is that media agencies are responsible for buying impressions. That’s how they make their money. Through the purchase of impressions, media agencies are responsible for creating “attention to" the message.

But, they are not responsible for creating “attention within" the message itself.

That’s the creative agency’s responsibility.

The problem is that there hasn’t been a system set up through which to buy and sell attention within the message like there currently is to buy and sell impressions.

Media agencies don’t want to be held accountable for the creative agencies efforts.

Hell, creative agencies don’t want to be held accountable for their efforts.

If we start to measure attention, it means that we will be able to start monetizing it. With monetization comes accountability.

With accountability comes fear.

And fear is why we’re in the mess we’re in now.

And so, the debate continues.

Why The Lack Of Branding Online And What Can Be Done About It

(This post is bit longer than our other posts. That said, we think it's worth it.)

Brand advertising budgets represent about two-thirds of a $186 billion advertising market. Yet, only 5% of overall marketing budgets are spent on the Web.

In 2009, U.S. advertisers will spend only $3.1 billion online on rich media and video ads in a branding-oriented capacity.

That’s in spite of the fact that users spend up to a third of their media consumption online, not to mention, the Web’s reputation for being an accountability-oriented, data-rich medium.

Why is this?

With all of the data available on the Web and ample opportunity to engage consumers, why aren’t advertisers spending more than a tiny fraction of their advertising budgets online?

For Branding To Grow Online, A Separation of Responsibilities Is Needed

When it comes to branding, whether offline or online, there are two very distinct and different steps that have to be followed.

Step one is to reach the intended target consumer. This is done through the efforts of the media agency and is measured through impressions.

Impressions are good for determining how well the advertising worked at creating awareness. But as the consumer moves down the purchase funnel and it becomes time to create interest, desire and action, in other words, build the brand; impressions become an inadequate measurement of effectiveness.

Impressions measure the number of opportunities a marketer has to involve a viewer in a message. But impressions fail to measure whether a viewer was actually involved in the message or not.

Engaging or involving a viewer in the message is the second, and equally important prerequisite if branding is going to be successful.

Involvement in the message is the responsibility of the creative agency. If the commercial doesn’t involve the viewer, it becomes more difficult to be able to influence that viewer’s attitudes, perceptions or behaviors associated with the brand.

While both reach and involvement are necessary components to having a successful branding campaign online, advertisers are currently being asked to judge the effectiveness of their branding campaigns on reach, i.e. impressions alone.

Are The Media Agencies To Blame?

Although it’s unfair to lay the lack of an adequate measure of branding effectiveness at the feet of the media agencies, in this case it wouldn’t be completely off-base.

The reason is that the majority of a media agency’s income is structured around media mix models where reach, frequency and GRPs are the inputs and outputs.

Introducing new metrics that don’t fit into the traditional marketing mix model, and even more importantly, which don’t fit into the way media agencies make money, will not be well received by media agencies.

Or, their CFOs.

Is There A Solution? And If So, What Is It?

It’s a given that branding would increase online if better measures of effectiveness were put in place. The questions that need answering are:

1. What would the appropriate metric or metrics be?
2. And, who would implement them?

Currently the front-end and back-end of an online buy are monitored so that click-streams going in and results—in terms of sales—coming out, are measured and monetized.

What is overlooked is the qualitative part in between–the level of viewer involvement, measured as time spent.

If branding is about building relationships, and relationships are built through time spent together, then we would argue that the solution is to continue to use impressions. But, in addition to impressions, as Geoff Ramsey, co-founder and CEO at eMarketer put it,

“To overlay the time spent data that is unique to the online space and provide a digital footprint measuring how the consumer is engaged with the brand over a period of time.”

We currently know how many impressions a $5 million buy delivers to the advertiser. What advertisers also need to know is how much time spent that same $5 million delivered?

A Rapidly Growing School Of Thought

There is a new school of thought that is quickly attracting followers that says that the measurement of advertising online should involved time-based measures rather than impression-based measures.

One such advocate is Jon Gibs, vice president, media analytics, at Nielsen Online. According to Jon,

“Instead of buying 100 million impressions on a web site, we should be buying X% of a person’s time.”

While we agree that time spent is a critical measurement, we don’t feel that time spent should replace impressions. Rather, our belief is that time spent should be an effectiveness measure that is used in addition to impressions.

Fortunately, time spent is now being measured by third-party analytic companies for use with most, if not all, digital platforms. Currently, this information is being provided to online publishers, who in turn provide it to media agencies in an attempt to better convince those media agencies to run advertising on their site.

As media agencies have yet to realize how to optimize and/or monetize time-spent data, it is seldom shared with clients. Where is the upside for the media agency? They currently make money by selling impressions whether the commercials are actually viewed or not.

What is needed is for an outside group to start to broker time spent for advertisers just as media agencies are currently brokering impressions.

(In order to be completely transparent, our company offers a product called CreativeAudits that allows advertisers to both optimize and monetize time spent with their advertising.)

By separating impressions from time spent, advertisers can start to hold their media agencies accountable for what they do well, building reach. Yet, at the same time, they can hold their creative agencies responsible for what they are paid to do well, creating time sent with the brand.

There is, after all, only so much time in a day. The more time a marketer can convince consumers to spend with their brand, the less time those consumers have to spend with the competitor’s brand.

That’s why we believe that there’s a direct correlation between share of time and share of mind. And, as we all know, share of mind ultimately leads to share of market.

So are we saying that time spent can serve as a proxy for sales? The definitive answer is still out on that. But common sense seems to indicate that if consumers aren’t paying attention to what the messaging is saying, it will prove difficult to build a brand. No matter how many impressions you have.

Time spent starts to measure if anyone is paying attention.

And, if you did up to here…thanks.

Procuring Creativity Out Of Advertising

Well, it’s happened.

Marketers are now starting to rewrite the rules in regards to which production houses an agency can work with. The marketers will contract with certain production houses, locking in the costs of lighting, labor, anything to do with the mechanics of a shoot.

The thinking, I’m sure, is that mechanics have little, if anything, to do with creativity.

If only.

In return for agreeing to be “locked-in” to pricing, these production companies would achieve “preferred vendor status.”

It was inevitable that it would come to this. Although procurement specialists have been employed by marketers for some time now, there was the always the unwritten rule that the cost to create the work (production) would be around 10% to 20% of the cost to run the work (media spend).

But today, with viewing audiences fragmenting and different screens (TV, computer, phone) requiring different creative, the ability to aggregate a large enough audience to justify the cost of doing creative the right way is becoming more difficult.

When marketers were able to reach 20 million viewers with one fell swoop, they could easily justify $500,000 plus for production. This is more difficult when the number of viewers is closer to 200,000.

Even though today’s improved targeting methods mean these 200,000 are probably a more relevant audience, it's hard not to do the math and justify the cost of production based on size of audience.

As the viewing numbers get ever smaller, the procurement specialist’s pencils get ever sharper.

Unfortunately, creativity suffers.

Hal Riney, one of the smarter people the advertising business has known, put it this way. “If we can, though the expenditure of an extra hundred thousand dollars or so in production, increase the impact, involvement and memorability of, say, a five-million dollar budget by even ten percent, we’ve added a half of million dollars in value for a hundred thousand dollars in cost.”

Seems like money well spent, doesn’t it?

Those extra hundred dollars or so in production is exactly what marketers want to cut back on. It pays for the lighting, the casting, the music, all intangibles that make one commercial strike an emotional chord while another one doesn’t.

Intangibles are why agencies are hired. Anyone can do the tangibles.

Anybody can strategize, anybody can rationalize, anybody with a few charts and graphs and common sense can find the target market. But to add the emotional element that separates one commercial from another, one brand from another, is in fact, something that only good agencies bring to the party.

To tell them to paint brilliantly, but to only use two colors because the marketer wants to save money, seems to be counterproductive.

I’m not saying that agencies and production companies should have free reign. That’s the other extreme and it has proven to be equally foolhardy. Agencies and production companies need to be held accountable.

But instead of tying their hands upfront, is it not more motivating to tie their profit into outcome?

The outcome that they are immediately responsible for is to get those that express interest in the commercial to actually watch it. Not just ten percent of it. But all of it.

If the marketer pays to have thirty seconds produced, then those producing it should be held accountable for those thirty seconds being watched.

If so, pay them well. If not, well, why should an advertiser pay full fare for failure?

Don’t restrict brilliance. Enable it. Trust in it. If it’s not delivered, then let the profit of those that promised they would deliver it, suffer.

Tying mark-up and profit into outcome (measured as time spent), rather than the size of the job, will have the production companies eliminate some of those lights before the procurement specialists even gets involved.

Maybe it's just me. But I've always found it easier to inspire—rather than punish—someone to brilliance.

For more on outcome-based pricing for agencies and production companies, go here.

Will Virtual DVRs Virtually Change Advertising?

Monday’s ruling by the U.S. Supreme Court to allow Cablevision to go forward with its virtual DVR product paves the way for on demand television.

It also spells the end of the current, and somewhat antiquated, VOD model.

Most VOD systems only allow you to choose from shows that are on the VOD menu. Cablevision’s virtual DVR allows viewers to ask for any show to be recorded to be viewed at their convenience. As TiVo’s own CEO touts, when viewing shows in a time-shifted mode, the majority of commercials are skipped.

If I had access to a virtual DVR, I’d ask for all my shows to be recorded for me. Since the shows are stored on Cablevision’s server rather than a hard drive, there is not a space limit to the number of shows I want recorded

Which means it only makes sense to have them all recorded.

When I then decide to sit down and watch one of my favorite programs I, like the majority of people, will skip any interruptions to my viewing pleasure.

What the U.S. Supreme Court’s ruling means is that commercials should now be considered optional viewing if they continue to be delivered in their current intrusive manner.

Not surprisingly, advertisers don’t like their commercials to be considered optional viewing.

No doubt Cablevision will find a way to require a viewer to choose how he/she wants to consume advertising, either before the program plays, or throughout.

Hulu employs this model, and the preference by most viewers is to sit through the advertising before the program plays and then watch the program without interruptions.

Of course, no one really watches the commercials before the program plays on Hulu. After all, it does offer us a two-to-four-minute window to go check emails or what’s happening elsewhere online.

It’s like the previews before you start playing a movie on a DVD. How many of you fast-forward through those?

Yep, thought so.

The role of programming in the past was to deliver viewers to advertisers the way that the advertiser wanted.

The role of programming in the future will be to deliver advertisers to viewers in the way the viewer wants.

Does this mean that advertising is dead? No. What it means is that advertising needs a new way to market itself. A way to transition from involuntary viewing to voluntary viewing.

So, how do we do that?

Like most things, it starts and ends with making money.

Which means the industry needs to figure out how to make money on fewer viewers rather than more viewers. On how long people spend with a message rather than how many see it.

On involvement rather than impressions.

As the number of people who actually see a commercial continues to decrease, a commercial’s ability to hold an audience will become ever more valuable.

An impression's depth will start to outweigh the number of impressions that are made.

Instead of converting 100% of the people 10% of the way, we will need to focus our attention on how we can best convert 10% of the people 100% of the way.

There's an upside to this. Well, actually two.

Not only will the advertising get better.

But, we will need much less of it.