The High Price of Low-Cost CPMs

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Marketing is essential for companies. Throughout the customer journey, marketing both changes brand perception and awareness and drives sales. Simultaneously, companies need to justify marketing expenses — down to the last penny.
Reaching a balance isn’t easy. Too often CMOs succumb to the pressure to keep costs down at the expense of their brand’s health or product sales. This is especially true in the age of digital media, in which the temptation to pay low rates often leads to wasting money. Why? Because a CMO can argue that they paid low cost-per-thousand (CPM) rates on their ad buy. But trafficking in low CPMs has become dangerous. Too many times, those low rates are borne of fraud and bots (ad impressions created by automated scripts, not humans). Our research suggests that up to half of paid media impressions fail to reach a marketer’s target audience.

The Problem with Programmatic Channels

In a waste model we built to measure the quality of impressions in common programmatic channels, we found many contributors to waste, all of which drive up the real cost of what initially appears to be inexpensive. Some of these contributors are:

• Ads seen by bots, not humans
• Ads, including video ads, that are not viewable
• Ads that don’t fully load
• Ads that miss the target audience
• Ads that miss frequency windows

Facebook recently abandoned plans for its demand-side platform solution because of the many unviewable ads, fraud (like bots), and the lack of valuable inventory available in display networks. Marketers must consider the real, hidden costs of low-cost marketing. An increasing number of marketers are looking at them — hard.

Marketers are well aware of these quality issues. EConsultancy and Signal recently surveyed 350 senior North American marketers and media buyers with ad budgets ranging from $10,000 to well over $1,000,000 per month. The survey showed that because of the industry’s lack of transparency, just 12% of buyers feel comfortable with the current display-advertising model. An ANA survey released in March showed that two-thirds of marketers worry that they may end up buying fraudulent inventory or inventory that shows up at the bottom of the page and is never even seen, and they’re starting to demand more transparency from their media partners. The ANA is championing a standard whereby marketers enter publisher agreements only when impressions are “measurably viewable.”

Channels to Focus On

We see an overwhelming case for investing more in known, verified audiences with logged-in users, like Facebook, Instagram, Twitter, Pinterest, Snapchat, and YouTube. And the same goes for addressable television. Such networks nearly eliminate fraud and waste. You know you’re dealing with real humans — not bots or theoretical audiences built with unreliable cookies or audience panels.
Furthermore, when users log in to Facebook, Twitter, or Pinterest on their computer, tablet, or smartphone, the networks recognize that they are the same person on each device. By contrast, if you’re using cookies to reach prospects, you as a brand don’t necessarily know that the 36-year-old man you identify on a smartphone is the same person who logged on earlier that day on an iPad and MacBook Air. This matters. Real, addressable audiences result in greater measurability and performance attribution in branding and direct response campaigns.
Moreover, these audience-first platforms are setting the highest standards for user experience, ensuring highly engaged audiences in web and mobile app environments that are least vulnerable to ad blocking.
However, decisions about these channels must be driven by cost per performance.

Moving Forward

We have two recommendations. First, don’t work with partners who are not committed to being transparent about every shred of data and every penny of cost. Programmatic is great, but let’s have transparent programmatic, in which a partner gives you full access to the data that enables you to gauge the success of your campaigns.
Second, always ask for CPMs with performance right next to them. For example, use return on ad spend for direct-response ads and viewability (at a minimum) for brands ads. Your impressions are getting cheaper? Who cares? The real question is whether they are becoming more effective. It all comes down to return on investment, which is driven by outcome divided by cost. To truly manage your media investments to ROI, you must manage your cost based on real impressions and business outcomes, not poor quality disguised as low cost.