New Pricing Models:
Why Cost-Per-Engagement Can Benefit Advertisers

From Adotas

Most online marketers are aware that CTRs for traditional banner ads have been declining steadily for years (a phenomenon commonly known as banner blindness). Adding fuel to the fire, comScore’s recent vCE Charter studyhighlighting the fact that 30 percent of display ad impressions are effectively bogus has some advertisers scrutinizing their display ad ROI with an extra dose of enthusiasm.

In response, a growing number of ad networks and publishers have begun offering a new pricing model call cost-per-engagement (CPE). (Full disclosure, my company, Cloud Nine Media, is one of these networks, and we sell our inventory almost exclusively on a CPE basis).

Cost-per-engagement lets advertisers pay only when users “engage” with their ad, rather than paying for every impression served or every click received. “Engagement” in the CPE context can mean different things, but some popular examples of CPE actions include Facebook likes, type-ins, tweets, completed video views or survey responses.

Oftentimes these engagement actions are presented to the user as a way to unlock access to something they want. In Cloud Nine’s case, it’s free WIFi access, but it might also be access to premium content, or virtual credits in a social game.

Networks and publishers that control this access are in a powerful position. Their audience is willing to engage with an advertiser’s message in a very real way in order to get what they want. This creates a fantastic opportunity for advertisers to re-orient their campaign around a particular action that they know drives business value for them, and to escape from the flawed logic that says that display ad CTR somehow gives rise to an invisible “halo” around other marketing efforts.

The CPE model has other benefits too. As David Tokeim, SVP of Media Solutions at SayMedia, explains, “Selling inventory on a CPE allows SAY to sell attention, rather than the potential for attention. Along with providing advertisers accountability, it shifts the focus toward creating rich ad experiences that connect with customers in a meaningful way.”

If you think about it, those sellers promoting CPE pricing do so because they believe that they can deliver genuine engagement at a lower cost or larger scale than their competitors. Maybe they can do this because their format is more effective, or maybe they can do it because they are reaching users in a more relevant context. Either way, if these CPE sellers don’t deliver the engagement they promise, they don’t get paid, which is a great thing for advertisers.

View the full article here.