Paying for your online media or advertising technology has never been ‘easier’…

If you’re new to the world of online advertising then the first thing that you need to learn is that the unit of currency that works for the majority of display advertising is the CPM (cost per mille or thousand). The number of ads displayed in a typical campaign is in the millions so to make things simpler everything is divided by a thousand. This is fine if you are showing a standard display ad that doesn’t do very much and all that you’re after is the percentage game. CPC (cost per click) is sometimes used for display or affiliate advertising but is mostly associated with search engine marketing where every ad that is clicked on has a cost.

Rich media advertising can deliver as many metrics as even the most data-orientated advertiser can handle and this is useful if the ad is built with many interactions – so if you want to count the number of aliens killed in a space invader game or the number of times a widget was shared then you can and these brand engagement metrics are a whole lot more informative than the click-through rate. But they aren’t really suitable for a payment scheme.

The video market is starting to change things again. Since video ads occupy the space between TV and online advertising the click-through measurement that has for a long time dominated online advertising is becoming less and less important. The promise of advertising online is that everything can be measured and this is true to a large extent but this has also become a noose with which to strangle ourselves. A middle ground is needed between TV (on an individual user level – largely unmeasurable) and online video (very measurable but sometimes unusable or irrelevant).

GRP (gross ratings points) are what a TV advertiser buys against, this is basically a measure of reach and frequency as a ration of the target audience. I’ve yet to see a meaningful way for this to be counted and since I’m talking about online video – I’m going to set this to one side for the time being.

Two online video advertising companies that offer alternative billing mechanisms are VideoEgg and Brightroll. VideoEgg started charging on a CPE (cost per engagement) basis earlier in the year and Brightroll have just announced their intention to charge using CPE or CPV (cost per completed video view). No doubt both of these are attractive to branding advertisers – after all wouldn’t a TV advertiser like to pay only for those viewers that actually sat through the commercials?

For a media agency one of the most important considerations is that the costs should be predictable since a large part of their revenue comes from a mark-up on these costs. The same applies for a publisher since they have fixed costs which they have to pay and want to maximise the  income around their content. Sales networks can be a little more adventurous and this is where the change is coming from for video since video networks account for a greater proportion of spend than portals in the video market.

There is probably another way of charging direct response advertitsers who want to use video but only pay for those that convert as a direct result and for this I think that we will see something along the lines of a CPAv (cost per acquisition from video). After all, if there’s one thing that’s true in our industry – we sure do love an acronym.