Cost per engagement

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Cost Per Engagement (CPE) is the online advertising pricing structure that was used to launch the latest Fatboy Slim album.[1]

Differing from cost per impression or click through rate models, a Cost Per Engagement model means advertising impressions are free and advertisers pay only when a user engages with their ad unit. Engagement is defined as a user interacting with an ad in any number of ways, including playing a game, taking a poll, rolling over an ad unit for a specified amount of time or taking a product tour.[2]

Cost Per Engagement brings a measure of performance to online advertising. Ads are served for free, and advertisers pay only when a user engages with their brand content. The approach has given advertisers a choice between quantity and quality.[3]

This technique may be applied to ad formats including video and rich media, for example, in web banners as invitations to view longer-form branded content such as videos, games or other interactive experiences such as widgets. An ad unit offering Cost Per Engagement appears like standard display ads with a few seconds of preview video. Users mouse over the ads to display a Flash window that shows the full clip without forcing users to leave the page.[4]

Contents

Other Advertising Pricing Models

Other advertising pricing structures include CPC- Cost Per Click, CPL - Cost Per Lead (lead usually meaning a free registration), CPS - Cost Per Sale and CPM/CPICost Per Impression, which is used to measure the effectiveness of advertising inventory sold (by the publisher) via a CPC, CPA, or CPT basis.

These structures are collectively referred to as CPA - Cost per Action, which is an online advertising pricing model, where the advertiser pays for each specified action (a purchase, a form submission, and so on) linked to the advertisement. Cost Per Engagement could be considered a sub-set of CPA in that the advertiser is paying specifically when a consumer engages with an ad. Today it is very common for advertisers to buy online inventory based on impression, spending a set amount per thousand delivered views-- what’s known as CPM.

History

The decision to price ad units only when users take action is meant to bring the accountability of online direct response placements, like search, to brand units as brands only pay when an action is taken. Despite more brand dollars moving from traditional media, pricing for Internet ads has remained heavily weighted toward performance metrics like Cost Per Click (CPC). According to the Interactive Advertising Bureau (IAB), 50 percent of deals in the first half of 2007 were performance priced, part of a steady increase compared to CPM pricing. [5]

By placing ads where users are most likely to respond, the advertiser passes the risk onto the ad network as the advertiser is charged only for interactions.[6]

See also

References

  1. NMK, Fatboy Slim trials performance based advertising
  2. ClickZ(2008-2-19)
  3. Internet Advertising Bureau Nicki Lynas discusses Fatboy Slim's pioneering approach to best practice in online ad measurement
  4. “Online Video Ads Can Be Fun," Emily Riley-Jupiter Analyst Blog (2008-7-9-08)
  5. “Historic Internet Advertising Revenues: First Half of ’07 Hits $10 billion, Q2 ’07 Exceeds $5 Billion for First Time," Interactive Advertising Bureau (2007-10-4)
  6. AdWeek(2008-2-20)

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