Understanding the Cost-Per-Engagement Ad Model

From MediaPost

The Interactive Advertising Bureau just introduced a new program to certify digital media salespeople.  This comes as little surprise, considering how many acronyms you have to master to be able to sell an ad online.  CPM, CPC, CPA and now. CPE?   Do we really need another acronym in the online ad game?

CPE stands for cost-per-engagement.  The term was trademarked in 2006 by an online solution provider looking to bring more accountability to brand units.  These days, it’s being used by a subset of publishers looking to differentiate themselves along one important dimension: engagement.  

As the litany of user actions that marketers care about has grown from simple clicks to include Facebook likes, shares, mouse-overs, poll responses, white paper downloads and dozens more, CPE has started to take root in the marketplace as a new – and necessary – measure of ROI in digital advertising.

Every online marketer that has run a display campaign is aware that the average CTR for banner ads has been falling steadily for years, a phenomenon labeled banner blindness.  Adding fuel to the anti-display ad fire is Comscore’s recent vCE Charter Study, which found that roughly one-third of display ad impressions served in 2011 never had a chance to be seen in the first place!

Confronted with stats like these, advertisers have begun to wonder whether their display ads are actually doing anything to move their business goals forward.  This is especially true for advertisers that need to move the needle on brand attributes, like awareness, favorability and purchase intent.