Friday, August 31, 2012

Buying Hope Or Buying Fact


When an advertiser buys media on a CPM basis, they're buying hope.

They're hoping that everyone who sees their ad or commercial will spend some time with it.

Hope lets a lot of advertisers sleep better at night.  “My ad will be seen by three million,” they tell themselves.  “I cannot be blamed if sales don’t work.”

Buying fact is when you buy media on a cost per click basis.  You only pay when somebody clicks on your ad or opts-in to watch your commercial.

The cost per click is higher than the cost per impression.  But you’re buying knowledge rather than potential.

Unfortunately, the knowledge gained doesn't scale well.

Very few people – 1 in a 1000 – click on an ad.

What this all means is this.  If you’re making a media buy to run in front of 3M people at a $20 CPM versus a $1 cost per click, your expenditures would be quite different.

Three million at a $20 CPM would cost $60,000.

Three million at a $1 CPC would cost $3,000 (assuming one click per thousand or 3 thousand clicks).

Then again, if your budget is $60,000 you could get approximately 60,000 clicks for that amount.

Now let’s say you’re the CMO.  Which sounds better to you?  An opportunity to engage 3M or knowing that 60,000 people did actually engage with your ad?  Which gives you better value for your $60K?

My bet is that most advertisers will still take the 3M.

Why?

Because when it comes to choosing between hope and fact, the fact is, hope wins.

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