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Video Advertising: Is CPM Still a Valuable Metric Today?

Video Advertising: Is CPM Still a Valuable Metric Today?

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What key metrics should advertisers be focusing on to effectively calculate cost per thousand (CPM) in video advertising?

In digital advertising, cost per thousands (CPMs) have long been used as a marker of how much an advertiser pays for every 1,000 impressions.  Somewhere along the way, however, CPMs started to be also used by some as a gauge for ad effectiveness or general efficiencies. This circular reasoning doesn’t provide marketers with much valuable insight and in today’s world, more insight leads to better decisions.

Rather, advertisers should be focusing on the metrics that influence a resulting CPM - why is this particular impression worth $15, while this other one is worth $2.75? In video particularly, advertisers should be focused on metrics like KPI performance, viewability and fraud levels to measure the impact their buys will have. Using these metrics, coupled with the CPM price, advertisers should be able to calculate an effective CPM to understand the true value of the inventory they are purchasing.

You get what you pay for - or do you?

With video, advertisers have a multitude of metrics they can dig into to see how a campaign is performing, so it’s important to identify which metrics tie back to specific KPIs. It would be shortsighted to measure the effectiveness of a video advertising campaign by how much one paid for it. In many cases, video is a branding vehicle and therefore the goal is to reach the largest amount of unique viewers within budget. For example, if the media plan is heavily focused on the cheapest CPM, this does not necessarily mean that the brand will reach the most unique viewers. Cheaper CPMs could mean a higher bot percentage and a lower viewability percentage.

If a video ad is served and nobody sees it - does it still count?

The ad industry has been trying to come to agreement on viewability for some time. Industry groups like MOAT and IAS have their own definition for digital video, as do agencies like GroupM. Advertisers should consider their own standards for viewability and calculate this into the effective rate they pay for inventory.

Fraud protection is more than a blacklist

Advertising fraud takes many forms so advertisers need to be sure their ad spend is not being syphoned off by bad actors. They won’t get this information by simply looking at a CPM - cheap doesn’t mean fraudulent and expensive doesn’t mean you’re necessarily getting something legitimate. As video demand continues to grow, advertisers need to understand and identify the common types of fraud.. When working with supply partners they should ask how much of their inventory is ads.txt compliant to ensure they are buying from approved sellers. How much of the supply is vetted according to strict quality guidelines that guarantee brand safety? The answer to that should be 100% - advertisers shouldn’t have to settle for anything less. Advertisers should take steps to ensure that their dollars are being spent on the ads they intended to buy, where they want them and that they are seen by real people.

Ensure creative has the format to flourish

Unlike display, player size matters in video. Are advertisers buying a true in-stream TV-like experience or a repurposed 300x250 display ad? If it’s the latter, they might be paying arbitrage sellers who are charging video CPMs but squeezing video ad creatives into static banner ad slots. This results in a poor user experience for audiences, and wasted spend on little to no value for the advertiser.

Video is more than TV and vice versa

If one measures value only based on CPM, newer technology like Connected TV (CTV) devices may be missed. As eyeballs move from traditional linear TV to other modes of viewing long-form content via connected devices, it is important that brands think about diversifying their media plans. CTV on average sees 40%+ higher CPMs than traditional digital video inventory yet coveted millennial and Gen Z audiences are particularly fond of watching video in this way.

The notion of measuring the outcomes of video advertising campaign by only the CPMs you paid is one dimensional at best. CPMs simply cannot tell you much beyond what you are paying for an impression. To truly gain an informed view of one’s video advertising performance and ROI, look at multiple metrics to be sure the inventory is fraud-free, viewable and optimized for specific campaign needs.

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Katie Evans

Katie Evans

    As chief operating officer at Telaria, Katie is responsible for the operations of the company, and the alignment of its global strategy, roadmap, and processes to fully realize the company’s growth. Katie has been with Telaria since 2010, and her tenure includes the oversight of teams across both the buy and sell side of the business, following the sale of the DSP in August 2017, including advertising operations, client services, product marketing, yield, creative and HR teams. Evans has built and led teams that have helped transform the company’s seller-platform business, supporting premium clients including Unity Technologies and Dish Network. Katie holds a B.S. in Business Administration from the University of Richmond.

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