CPM Is Dead

May 4th, 2007 by Lars Johansson

Using CPM is like handing out fliers. You know they’re also called throwaways, right? That says it all. It’s quantity over quality.

What makes the Internet such an efficient channel (if used properly) is that it can be instantly measured, analyzed, evaluated and optimized.

Get the right message to the right audience at the right time. Look for context and behavior. Be relevant.

The salesperson’s argument for the CPM model is that you get branding included in the price (even for campaigns whose sole purpose is to drive sales). Sure, there are ways of measuring branding, but it’s also easy for those who sell advertising space to hide behind that as a way of trying to avoid having to offer CPA and face full accountability. The only reason why more advertisers aren’t pushing for CPA is lack of knowledge or a failure to realize that online advertising isn’t the same as offline advertising.

Even if the only purpose of your campaign is branding, why not opt for CPC instead of CPM? You probably want people to click on your banner and come to your website. Then why settle for views? You want an action. The action is to visit your website. CPC seems like the better choice to me.

Committees such as KIA and organizations such as The Association of Swedish Advertisers should, in my opinion, educate advertisers on the benefits of moving to paying for performance rather than paying for quantity.

Even if you are not offered CPA as a price model you can easily calculate CPA in order to evaluate the outcome of campaigns. The more businesses that calculate CPA, the better purchasers of advertising space they become.

A very simple formula to calculate CPA:
total cost of advertising / # of wanted and defined actions (usually some sort of conversions)

Calculate how much it costs to get a visitor to take a wanted action if you use CPM and CPC.

Try to avoid CPM if you can.

Yes, I am a bit tough on CPM. And, by all means, do continue to offer it. However, advertisers should at least have the option of choosing between CPM, CPC and CPA. But first advertisers need to understand the difference.

To sum things up:

KIA (and their equivalents in other countries) should educate advertisers on the benefits of CPA.
KIA could also try to get affiliate networks (and other types of networks and websites that offer CPA) to agree on a standard for measuring conversion. Today all networks have their own codes that you have to add to your conversion points meaning you may end up paying for one sale to several networks (if the visitor has clicked on ads from several networks within 60 days or whichever time span the network uses).

My final words:
Ta ta CPM! May you rest in peace!