Engagement not eyeballs will be the name of the online ad game

Advertiser demand for data and better targeting means the CPE model could be here to stay despite online publishers’ initial concerns.

News last week that Diageo was launching its latest three-month campaign for premix drinks with the Mail Online on a cost-per-engagement (CPE) basis has sparked off the controversy around the payment model once again.

CPE came to people’s attention last autumn, when it emerged that Procter & Gamble had been talking to media owners about using the payment model for its advertising. The FMCG giant subsequently invested in a major CPE campaign.

At its simplest, CPE means advertisers paying media owners when audience members interact with their ad, leading one NMA staffer to dub it “CPA in drag”. The difference, and the source of the controversy, is that in a CPA (cost per acquisition) deal, the action the advertiser is paying for is clearly defined. In CPE, what engagement means is up for grabs.

In the case of P&G, engagement included watching an embedded video, playing a game or signing up for a newsletter, all evidence that the audience member was more interested in the brand than someone who just looked at a banner or an MPU (mid page unit). And the P&G story was followed by news that Polygram was using a CPE model for its campaigns to break new bands, only paying for people who clicked on an expandable banner to watch a band’s video. The deal agreed between Mail Online and Diageo takes the model further, with the publisher being paid more when readers take additional actions after viewing a Diageo ad, such as watching a movie, creating a playlist or entering a competition

The attraction of CPE models for brand advertisers is obvious. Rather than just buying numbers, they only pay for those people who have demonstrated an interest in their product or service. It’s a way of bringing brand advertising closer in nature to the CPA models of direct response.

Smirnoff
In the case of P&G, engagement included watching an embedded video, playing a game or signing up for a newsletter, all evidence that the audience member was more interested in the brand than someone who just looked at a banner ad

However, not all publishers have welcomed the move as creating a pay-by-performance model for the display side of the online advertising world; back last autumn there were significant concerns and some publishers refused to accept the new approach. They argued that their key skill is in segmenting their audience by creating different kinds of content, and that CPE models take away their ability to monetise such segments and place them at the mercy of the quality of the advertising. But according to Mail Online’s digital director Melanie Scott, the publisher is now running half a dozen CPE-based campaigns and gets a brief a week based on the model. Clearly economic reality means that most media owners can’t afford to leave money on the table.

What’s interesting, though, is the response elsewhere in the industry. Discussing the Diageo deal in last week’s New Media Age, media agencies generally supported the model and the benefits it delivered advertisers in terms of paying by results, while industry bodies the IPA and the IAB played down the importance of CPE, saying the ambiguity of the term engagement meant the model was of limited importance. Indeed in next month’s issue of Marketing Week’s Digital Strategy supplement, Jack Wallington, the IAB’s head of industry programmes, says he doesn’t see CPE as making much of a dent for the vast majority of advertisers that will be continuing to pay for eyeballs rather than clicks for the foreseeable future.

This view may turn out to be true, but the rise of CPE highlights three things. The first is the desire among brand advertisers for better targeting, something that is also demonstrated by the rise in behavioural targeting. A third of online display campaigns now include a behavioural element, according to the IAB, driven by the need for greater effectiveness and efficiencies in the current economic climate.

The second thing that the growth of targeting models points up is the desire of the online industry to bring in brand advertising money. Some publishers may resist the loss of control that comes with CPE models, but all are using behavioural targeting to improve yields and help sell remnant inventory.

And this in turn shows the third element of the rise of targeting; the changing relationship between advertisers and publishers. I mentioned a couple of months ago the concerns among some brands and media owners that traditional media agencies aren’t taking full advantage of the complexities of the digital world. Instead, they argue, the data that online media owners hold about their users offers advertisers a far more nuanced, detailed view that will allow them to increase the effectiveness of their advertising, and at the same time allow media owners to maximise the value of their audiences.

This may not be such a change for publishers of subscription or controlled-circulation titles, but for those from a newsstand background, it’s the same kind of revelation as the one created in the music industry by digital downloads. And it suggests that while CPE models may not catch on in their current form, a hybrid form based on both data and performance might be the way forward. l

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