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Is Engagement Pricing Really Necessary?

Is Engagement Pricing Really Necessary? Jayant Kadambi

Imagine you’re on a business trip and you need to rent a car.  You go to the rental counter, you pick the model you want, and you ask what it will cost to rent it for three days.


 “Well,” the clerk says, “it depends.  We don’t think it’s fair that you have to pay for renting a car for 72 hours when it’s going to be parked for a lot of the time—that’s why we’ve introduced our new RightPrice™ program.  Instead of a daily rental fee, we charge you twenty cents for every mile you drive the car, ten cents for every right or left hand turn you take, two cents for every song you listen to on the radio, and a nickel per hour for using the air conditioning.  Actually, I see that you qualify for our AAAA member discount, so you’ll get free left turns.”


You’d walk right out of the shop and go to Hertz, right?  Sure, on some abstract level you can see how the clerk’s pitch makes sense, but you just want to know how much it’s going to cost to get to all of your meetings and back to the airport, and when you pay by the day you already know how to tell if you’re getting a fair deal.


You ought to have the same reaction the next time someone tries to get you to buy online video advertising with pricing based on “engagement.”


People have been buying and selling video ads on TV for decades.  Everyone in the industry knows how to buy impressions on a CPM basis, and understands the work that needs to be done to determine the ROI of on money spent. 


Publishers and networks shouldn’t be offering you a new way to pay for ads—we should be offering you more insight into what you’re paying for. 


We should be telling you where your ads are running, when they’re running, and exactly what content they’re running against.  We should be telling you whether and how users are interacting with your ads, and whether users are trying to skip them.  Most importantly, we should be helping you use this data to create more efficient campaigns that deliver better results for your business.


Aside from generating enough market confusion that there’s a short term opportunity for a few clever arbitreurs, I don’t see how introducing a new pricing mechanism based on a nebulous “engagement event” helps marketers buy campaigns more effectively—at least not yet. 


Let’s face it; nobody has figured out the best way to advertise in online video.  It could be that down the line the industry is going to settle on a new way to price video advertising, but it’s going to take a great deal of research and experimentation to get there.  For now, video advertising doesn’t need a new pricing model—it needs a new, more transparent partnership between advertisers and publishers.

Jayant Kadambi has over 18 years of experience in the areas of networking, hardware architecture and semiconductors. Prior to co–founding YuMe Networks in 2004, Jayant was Vice President R&D and Officer of Netopia, Inc., a publicly held...

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