Frank's Take

The Math in Media: Digital Edition

There are many ways to measure various forms of media. To help my clients achieve the best ROI from their media campaigns, I look to the math behind the media to ensure their marketing objectives and target audiences are reached. With each form of media, there are specific numbers to understand and focus on that truly make a difference. Not only for deciding which mediums to use, but how much to invest in them. While looking at the numbers is important, there are other factors to consider as well.

Digital Edition

What most media buyers focus on:

Digital advertising, like other forms of media, was originally handled through direct sales. Media buyers selected and purchased inventory from the publishers they felt had the best content to reach their client’s audience. It involved a lot of negotiation with proposals, phone calls, and emails. This method of buying has decreased over time as many have moved to working through programmatic buying (real-time bidding and automated guaranteed) which they see as a much more streamlined process.

Buyers see Programmatic and Real Time Bidding (RTB) as the best way to purchase advertising inventory due to its efficiency, targeting capabilities and cost effectiveness.  The open marketplace they use to buy ad impressions online is set up like a virtual auction, allowing for instantaneous ad bidding. Each buyer knows the budget they must work with as well as the audience they are targeting and will use these bidding models to figure out how to get the most impressions delivered at the lowest CPM.

Each programmatic and RTB campaign cost is based on CPM (Cost Per Thousand Impressions) but there are several other possible charges involved that a buyer must factor in.  As simple as many networks attempt to make the buying process seem, the total cost of running an effective digital advertising campaign includes much more than just the cost of the impression alone. Technology options like; ad blocking, ad serving, block chain, demographic and behavioral targeting costs as well as additional advertiser fees like management services and inventory all add up. Advertisers must understand that with each layer of targeting and “ad delivery protection”, the higher that CPM rate will be.

These ad placements are purchased through a Demand Side Platform (DSPs), on a single-impression basis. Unlike traditional CPM models, their algorithm automatically optimizes the buy to get lower costs and maximize performance. The DSPs facilitate the process of buying the ad inventory on the open market and typically integrate the use of Data Management Platforms (DMPs) which are able to provide the ability to reach a targeted audience from collected cookie data. The available inventory for these impressions come from the Supply Side Platforms (SSPs). This is where publishers manage all their unsold advertising inventory and look to auction it off to grow their digital revenue.

Ultimately, because this is an auction model, the media buyer can’t predict how many impressions the campaign will receive or the exact CPM rate that will be charged. Since each impression is being auctioned off and priced individually, the metric for RTB becomes an effective CPM or eCPM for the total budget assigned to the campaign.

The best way to explain the difference between the “old way” of buying impressions on a cpm model and the newer way through RTB is simple. Buying ad inventory directly from publishers is like buying a bushel of apples from the grower. Buying through the new model is like buying a bushel of apples one at a time from different stores, all at different pricing. In the past advertisers paid a fixed rate for each bushel. With RTB, the media buyer bids for each apple (impression) based on its individual characteristics and quality. This means that the advertiser still ends up with a bushel of apples at the end of the day, but the overall cost for the bag will be an effective value built from all the individual prices the advertiser paid for each, consequently becoming an “effective” CPM.

Other factors to consider:

The digital world requires the navigation of an intricate network of relationships to ensure that there is a connection being made with the advertiser and their audience.

When “old fashion” negotiations are removed and replaced with automated systems like programmatic buys, these “cheaper ads” can produce very little return in terms of their effectiveness for several reasons and thanks to fraud can cost a lot more than expected.

There is a much greater chance of fraud with a programmatic RTB ad buy through automated engagement. Bot traffic and unseen ads count as “delivered” and are charged for but may not be physically seen by anyone. Ads so far down on a web or mobile page or bots that accept ads for sites that don’t exist can cost a company big money and yield very little return. Since regional advertisers rarely have large digital budgets, they need to be assured as possible that their digital budget is being accurately delivered.

Believe it or not, one of the added fees that can go along with digital advertising is “Viewability”. Advertisers can pay extra to only track and count impressions that are actually seen by viewers. The goal of viewability tracking was set up to reduce wasted spend on ads that were never viewed. This is something that happens more often than you would think. Most agencies get paid on delivery of the ads, seen or unseen. My agency has installed safeguards to minimize this issue, because who wants to pay for an ad never seen. While the initial cost may be slightly a bit more per impression, the quality and value of the ads is well worth the initial difference.  

Another issue that programmatic buying can lead to is delivering ads on sites where an advertiser would rather not be seen. Everyone has opinions and depending on whether an audience agrees or disagrees with a certain point of view can affect conversions or sales. When choosing an RTB campaign, you are permitting an algorithm to decide where and when to find your audience. Sometimes eliminating or “blacklisting” specific publishers from being able to serve your ads can help to lessen the opportunity to have your ad show up in the wrong place.

There are new issues that come up all the time in the “digital wild west” and good agencies should always be on the lookout to find out how these systems are trying to take advantage of the advertisers. Always ask questions and always look at the details.

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