Given the power and success of Google's CPC search business model, it's not surprising that the products du jour in online video advertising are performance pricing, CPE, CPV, and CPC. At the same time, advertisers are feeling the effects of the economy and are showing a greater interest in measurable ad spends. However, like all online media tools, the devil is in the details (or in this case, the acronyms).
Let's take a closer look at the benefits and downfalls of each of these online video advertising pricing units.
Cost per engagement (CPE)
CPE is a top-of-the-funnel performance pricing unit. Introduced by VideoEgg in 2007, it has been copied and tweaked by various vendors in the video advertising category. The promise of CPE is simple: Advertisers avoid being charged for wasted impressions by only paying when a user engages with their ad.
On the positive side, CPE does a phenomenal job of helping avoid bad placements, like below-the-fold impressions and rapid page view impressions on social network apps. In addition, engaged users are much more likely to consume an entire video ad, strengthening the case for engagement optimization for many campaigns.
On the negative side, advertisers using the CPE model often pay for views from bored consumers rather than their real, engaged target audiences. Media vendors typically sell CPE in tandem with a broad site list that includes many social network, social media, and gaming sites. In order to maintain margins, media vendors optimize campaigns to placements with high engagement. In theory, this is in line with the advertiser's goals. However, when targeted to broad site lists, engagement occurs on social sites with irrelevant viewers instead of with the desired demographic.
When buying CPE, you should focus on three techniques to make sure you're getting the most out of your buy:
- Make sure the proposed site list is tailored to your audience objectives. There is no value in getting engagement from users outside your target audience.
- Avoid social networks or social media inventory unless those sites directly meet your audience target or campaign goals.
- Measure a performance metric further down the funnel than engagement, such as CPV or CPC. If you want to verify that you're getting the right engaged customers, see what they do after they engage or click.
Cost per completed view (CPV)
CPV is a middle-of-the-funnel performance pricing unit. This is a new entrant to the performance pricing mix that ensures that you only pay for impressions in which viewers have entirely engaged with and consumed your message.
There are many benefits associated with CPV. It serves as a strong filter that helps to counter traditional advertising objections such as inattention or avoidance. CPV is particularly powerful for advertisers who have a complicated message, important product information, or a new product to introduce.
On the flipside, the value of CPV is highly dependent on creative. A 15-second ad that includes a seductive dance by a famous female celebrity will garner extraordinary completion, and you may overpay as a result. Conversely, if you have a dry, five-minute instructional video on how to increase the storage capacity of your DVR, you may be startled by the price quoted to you by your media vendor. Additionally, like CPE, CPV completion rates can never be taken independently of site list, so you need to make sure all sites are in line with your media objectives before making a CPV commitment.
When buying CPV, make sure to follow these guidelines:
- Test CPV alongside other pricing models. Because creative is a significant factor, you may find that you get better performance with a different metric.
- Make sure your site list matches your audience target.
- Double verify your completions are occurring with the sound on.
- Test multiple creative executions and measure another metric further down the funnel. If completions are not correlating to actions, this metric may not meet your needs.
Cost per click (CPC)
CPC is a deep-in-the-funnel performance pricing unit that's widely used in online advertising. CPC was first introduced in video by Vibrant Media, and it remains a nascent model because most video advertisements today are regurgitated television spots with little or no call to action. This pricing model can be very powerful if your creative is designed to drive clicks, or if you need a method to compare the performance of various vendors on a plan.
CPC does have some benefits, like tying payment to clear user action. It can track when users leave what they were previously doing and further interact with your brand. And, with multiple creatives, you can test different calls to action and focus on the version that is best for your desired goal.
However, sites with the highest click rates are often the sites with the worst content. For example, full episode players (i.e., placements where users are watching television shows online) often have low click rates because the user actually does want to watch the show. Additionally, research demonstrates that high click rates don't necessarily mean higher metrics down the funnel -- you must test and optimize.
When buying CPC, consider these best practices:
- If the goal of your campaign is to drive traffic to a site that's further down in the funnel, then CPC pricing is ideal. If not, you may only want to compare CPC, not necessarily optimize to it.
- Vendors will optimize to sites with high click rates, so you need to ensure that those sites match your audience goals. Track additional metrics down the funnel, such as bounce rates. That way, you can avoid getting confused users or users who are trying to avoid your ads.
When used correctly, performance pricing can be one of the most powerful tools in a media buyer's toolbox. It's important to view these tools as one of many options -- not a silver bullet -- and to do wide ranges of tests to make sure you're getting the most out of every media dollar. Fundamentally, these pricing models were introduced as a response to media community demands, and it's almost certain that the evolution will continue. The ultimate success of any pricing model is not what it does in aggregate for the industry, but how it works for your campaign's specific needs, goals, and performance metrics.
Tod Sacerdoti is the CEO and founder of BrightRoll.
On Twitter? Follow Sacerdoti at @todsacerdoti. Follow iMedia Connection at @iMediaTweet.
