Is the Future of Digital Ad Buys in Cost-per-Engagement?

The term “banner blindness,” while alliteratively catchy, is a thorn in the side of online advertisers entrenched in many CPM (cost-per-thousand impressions) campaigns. Advertisers paying for real estate on web pages want their impressions to matter; they want their ads to be seen (even if briefly) and their brand awareness to grow. They know not all of these ad impressions will be dutifully read by their audience, but that’s often the accepted nature of CPM. As long as an ROI is met, no harm done, right? Perhaps. But is there a better way?

As many of us know, those pesky web surfers – i.e., our intended audience – are becoming increasingly adept at ignoring these display ads. Banner blindness is by no means a new phenomenon, having been first coined in 1998(!) by a pair of Rice University researchers. But research from comScore is showing it could be getting worse, because paying for ads that don’t have the chance to be seen is even more troublesome than ads that are at least visible on your audience’s web page (i.e., above the fold). In short, CPM is a tricky beast that can produce murky results.

The CPC (cost-per-click) ad model is the most common alternative to CPM, but there’s a swell of new traction around cost-per-engagement (CPE). The CPE ad model is as it’s described: advertisers are paying for a certain level of demonstrated engagement with your ad. What that level of engagement it depends on the advertiser and the ad network they are using, but the possibilities are more varied (and often yield more creative ads) than what you could expect from a CPC or CPM campaign. Some examples of engagement with an ad include the target audience taking a survey, tweeting a link about the brand, watching a video to completion, or submitting their email address. If your audience does one of these actions as part of your ad, you’ll pay for that engagement. If not, you won’t.

If the thought of getting someone to happily interact with an ad sounds far-fetched, you’re right. But the trick with CPE is that your audience is often getting something in return for that engagement. Examples include trading this engagement action for goodies like premium content, free services (such as Wi-Fi access), or discounts on products they are already showing an interest in.

CPE figures to be more expensive than other digital ad formats, but it takes a lot of the guesswork out of the process. After all, you know what you’re paying for, and you’re only paying for what you actually get. This really contrasts with the incumbent CPM and CPC models, where you generally either hope for clicks (or at least eyeballs) on a high volume of impressions (as with CPM), or hope for conversions on the clicks you’re paying for (as with CPC).

Each ad model has its strengths and weaknesses, but it’ll be interesting to see where, in a few years, CPE stands in comparison to its longer-tenured counterparts. Will the higher cost of CPE ad campaigns deter advertisers? Can advertisers find a way to combat banner blindness with better ads or more eye-catching page placements for their CPM campaigns? Will another model, outside of these three, emerge as the premier way to serve ads with transparent benefits and attractive cost points? I don’t think anyone has the definitive answer yet – we’ll see how advertisers, ad networks, and publishers work together to shape the future of digital ad serving.