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Three Reasons Why Cost per Engagement Advertising Rules

by Sebastian Tonkin  |  
November 20, 2012

Given all the competing ad content online, most online publishers have a hard time holding their audience’s attention. So how do you make your ads stand out from a sea of others? Do you use brighter colors? Create a better design? Use flash and great music? Taking a step back and looking at the methodology---rather than the fine details---will likely have a greater impact.

Historically, ads have been priced in such terms as cost per 1,000 impressions (CPM), cost per clicks (CPC), or cost per sessions (CPS). Those remain the major terms for classifying ad sales and pricing buys. However, in the new landscape of all things online, does labeling ad units in this way really yields the best results?

This blog post will argue for the significance of the cost-per-engagement (CPE) model, which defines ad units as interactive engagements rather than static impressions. CPE is a relative newcomer within the changed landscape. This post will offer three key reasons why you should stop and give CPE a good long look before continuing down the pure impression-based road.

1. CPE Advertising Gets More Attention

If no one pays attention to your ad, it’s not going to have any effect. In the case of TV or radio, if you watch or hear the ads, the message has entered your brain at some level, and the advertiser has made an impact. The online landscape, however, is a bit more complex. In a medium where only 0.1% of banner ads result in measurable consumer action, “seeing” the ad just isn’t enough.

So, how do you garner that coveted attention when the average surfer spends just seconds on a page before flitting to the next? One word: engagement. Engagement requires attention; impressions don’t. And if your engagement action requires people to think and act and engage with your brand, well, then you’re getting somewhere.

CPE puts engagement front and center. For that reason, it’s well-suited to ad formats designed to get people to do something---rather than just stare blindly at what’s in front of them. You might, for example, have to type in a word, click through a series of steps, or answer a question. Every CPE campaign that an advertiser runs online represents some type of measurable action by the user. And where  action and engagement is happening, attention is being paid.

2. Publishers That Support CPE Have More Pull With Their Audience

If people really want something you have, they are willing to do more to get it. That is true across many spheres, including the web. Offer access to something your audience values or feels necessary, be it a show, a site, or free Wi-Fi access. Require them to do something before they get access. And like magic they’ll do it! (In this context, the principle is often referred to as a value exchange.)

Where might you have come across an example of this? Let’s say a new episode of your favorite series comes available on Hulu. How many in-stream ads would you be willing to sit through in exchange for the privilege of watching this programming online for free? Well, according to comScore, an average of 50.7 video ads were delivered per Hulu viewer in August 2012. Are you into social gaming? You might be asked to complete a survey or trade a Like to receive virtual credits. At the airport looking to get some work done or just mess around online before your flight? You could be asked to give 45 seconds of your undivided attention to a video or ad flow in exchange for that nice free Wi-Fi.

In all those cases, you get what you want (e.g., to watch a show, get credits, use free Wi-Fi, etc.) and the advertiser knows that advertising message has been delivered and received. That interaction creates new opportunities to buy the attention discussed above with a guarantee of delivery, both of which are needed to change perception and behavior.

3. CPE Advertising Promises Better Accountability

If you could get something for nothing, you’d take it, right? Interestingly enough, the CPE model turns this idea on its head. Boldly and bravely, it says, "I guarantee you something, or I get nothing." Wait---what?

Yep, many publishers using high-engagement ad formats offer CPE pricing as a way to further substantiate the benefits they offer to advertisers. Unless the audience engages with your message in the agreed upon way, you don’t have to pay the publisher. Plastering a collage of ads on a single page and labeling each one an impression doesn’t cut it here.

That agreement creates a strong incentive for publishers to deliver real results to advertisers and to get the attention needed to yield meaningful changes in perception. CPE, or value exchange-based publishers, are saying, “I can offer you guaranteed delivery of your ad to an interested audience, and that audience will give it 30-45 seconds of attention, or else you don’t have to give me a thing.” It’s a stark contrast to the incumbent models.

What are your thoughts on the CPE model? Which model do you see as most effective and valuable for advertisers?
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Sebastian Tonkin is Boingo Wireless’ director of advertising products and strategy, and leads the development of Boingo’s location-based advertising services and innovative Wi-Fi sponsorship campaigns.

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