CPC-based advertising is a very elegant model of determining value and ROI for advertisers and brings an amazing amount of control at a very granular level. It’s much easier to get our heads around, easier to sell, and easier to optimize to than a CPM-based model. It’s also relatively fair.
As digital advertising and digital marketing have become more and more trackable and adherent to direct-response metrics, you rarely hear CPM come up as a “thing” in CPC channels. Reality is, though, that it drives the whole machine. Lurking beneath all the seeming “fairness” of a CPC payment model is a big, gnarly, machine-algo-driven world of CPM that is still controlling most everything that happens in the digital space.
In this post, we’ll explore an example of this hierarchy, how it affects marketers, and why search isn’t immune. It might not be the most uplifting read, but at least we’ll know the score.
Last week, a colleague posted in our agency project management space that he’d seen GDN traffic from nytimes.com drop dramatically for one of our clients in the last few days. He was wondering if anybody else had seen the same pattern on other accounts.
There are a few possibilities for why this might have happened:
All four of these possibilities are driven by the same reason: CPM is a priority. Let’s pick 1, 2, and 3 apart (we’ll leave Google out of it for now).
One challenge that we frequently see is our clients wanting to run banner split tests in GDN. It is constant. Sometimes you can even get some compelling metrics, but you are never executing a clean test.
You can only run a clean banner test if you are using a traditional display effort with an ad serving platform that is 50/50-ing your creative after the impression is already “bought” – and that is enabled by the fact that you are paying CPM in the first place. The fact is that even if you set your Google GDN campaign to rotate evenly, even if you set a 50/50 experiment to rotate your creative evenly on top of that, Google will not do it.
They would be stupid to do it, in fact. They would be losing money by 50/50-ing your creative when one variation is going to have a better CTR and therefore make them more CPC money. The algo will always favor that known better CTR ad, try and “guess” the CTR of the less known ad, and only let enough impressions through on the less-known ad to “learn” if it in fact might make them more money than the control ad.
If and only if the less-known ad’s CTR success is established, the experiment ad will “take over” the lion’s share of the impressions and start to balance your results to look like something 50/50-ish happened. But it really didn’t.
So, lack of control on managed placement activity and lack of clean GDN banner ad tests are 2 things influenced by our CPM world. A few others include:
If you think this issue is limited to display-based channels only, you are wrong. Yes, the impact is often less visible in search because there are more ad slots, thus more true CPC position-based auction dynamics to play with. CPM is still a huge factor, though.
For every institution that “controls” impressions on any level – Google, Facebook, The New York Times, or even smaller AdSense publishers – winning means getting the most money out of every impression that is allowed to happen.
So whether it’s driven by very sophisticated algorithms (like at Google) or subjective mom-and-pop AdSense publishers blocking site ads that don’t pay out agreeably, seemingly-CPC advertisers are really operating in CPM worlds. It is less evident in google.com search because of the standard multiple ad slots that allow the bid to factor more prevalently, but it happens in search channels too – and in some limited ad slot situations (hello mobile!), the impression battle becomes more evident.
Susan Waldes has worked in the search engine marketing industry since 1999. She joined PPC Associates in August 2011 after serving as the in-house SEM manager for e-commerce retailer ivgStores. Susan has handled a multitude of lead generation, branding, and e-commerce clients in her previous roles at ROI Revolution and Rockett Interactive, as well as a stint as an independent SEM consultant. Susan has a BFA from Savannah College of Art and Design, and has contributed insights about SEM and client relationships to the PPC Associates blog and other highly regarded outlets, including Techipedia.com.