Alternative to the CPM

Online advertising transactions are all CPM based. You might think my wild assertion is out of line. You might think you’re buying ads on a CPC or a CPA basis. But when a publisher is looking to sell ad inventory, they’re thinking about the CPM. “How many dollars can I get for every thousand ad views?” And when that CPA deal or that CPC deal comes in the publisher’s doing the math to convert that number into a CPM.

Blowing up the CPMFor a CPA deal they’re estimating how many acquisitions they can send to the buyer for every thousand ad views. For CPC, how many clicks per thousand ad views. They’re boiling it down to a CPM because that’s how they can compare the deals. It works like this all the way up and down the funnel.

The CPM has been around for a long time. With the advent of the RTB auction model, the CPM is very dynamic. Each impression up for auction is individually valued based on countless bits of information about the user, the page, the size, the date, the historical performance and a variety of other variables. Even though a separate auction is run for each impression, the bid prices are still in the form of a CPM. It’s in our blood. It is the end result of normalizing the value of an ad impression so that it can be compared to its peers.

Some Problems

I want to point out a couple of problems with the CPM. First and foremost, it’s a single number. This aspect causes a couple of secondary problems that put the buyers at risk. One of the big ones is that there’s no guarantee that the ad will actually show on the page. Steps have been taken to address this by several companies. The result of this problem is a topic near and dear to my heart: discrepancy.

I spent the better part of two years battling discrepancy. I worked on tracking software, forensic scripts and put in more firebug time than I cared for. Someone finally put in a secondary notification to allow for discrepancy tracking at the impression level. Even with that, the problem still exists. The CPM, a singular number, can’t help address this problem. When the buyer wins the impression, they’re stuck with it no matter what happens.

The singular nature of the CPM has another secondary problem: Auto-refresh. Some publishers refresh the page or the ads after a fixed amount of time. This could be as little as 30 seconds. Sometimes they’ll refresh the ad on a mouse gesture after a fixed amount of time. There’s no data in the bid request that tells the buyer how long the ad will show. Often times, the selling platform isn’t even aware of the auto-refresh. But there it is, frequently short-changing the buyer.

The second big problem that the CPM doesn’t help is view-ability. Every ad-tech company and their VC’s mom are looking for a solution to the view-ability problem. You see view-ability stats in pitch decks all the time. People are attacking it with big data, and Javascript, and OpenRTB. It, again, puts the buyers at risk. At the root of that risk is the fact that they bought the impression based on a single, fixed number and they’re stuck with it after they bought it. Sorry if the ATF flag is inaccurate, buyer.

Let’s Kill the CPM

I have a proposition for you and it’s not a totally original. There have been calls for this notion before. You can take it or leave it; I think you should take it. Let’s kill the CPM and replace it with several CPXs. I’ve highlighted two or three problems where a singular number is not doing the industry any favors. To solve just those problems I propose we use three numbers.

Let’s have a number for the opportunity to show an ad. This number is charged to the buyer when they win the auction, regardless of what happens afterward. I’ve decided to call it Cost Per Opportunity (CPO). This won’t replace the CPM in the auction model. In fact, having three numbers replacing the singular CPM will add some complexity to the auction. I’m afraid that the supply side stacks will have to do some work. Those guys love mathematical modeling though. Right, Neal?

Another number will charge the buyer when their ad comes into view. That means that above and below the fold are less relevant as signals in the bid stream. To track this number the exchanges and supply side platforms will have to track the position of the ad and develop some tech to charge the buyer the right price. Presumably this Cost Per View (CPV) will come across with the rest of the bid data from the buy side.

My third proposed number is a fun one because it works quite well with display media as well as video. The Cost Per Duration (CPD) charges the buyer on a per time increment basis. Consider a scenario where the buyer is charged in five-second increments when their ad is in view. The CPD might cap out after 60 seconds.

What Changes May Come

Imagine bids coming across the wire with these three numbers instead of a CPM. This would force the sell-side to pay close attention to how each publisher’s ad unit performs against these numbers. The auction system will have to be reconsidered. How are we to use a simple second price auction model with three prices in each bid for different aspects of the available impression? Again, this is a solvable problem. How long was a truly second price auction going to last anyway?

For the publishers, the incentive to auto-refresh below a 60 second threshold is greatly reduced. They’d get paid while the ad is showing and the risk to the buyer goes away if the publisher still thinks the a short refresh rate is worthwhile.

Below the fold positions would no longer be risky to buy. Buyers simply pay the opportunity cost and only get additional charges when their ad comes into view. Publishers won’t have to wipe out their BTF slots or develop fancy ad serving to draw in new ads when one of those positions come into view.

Discrepancy becomes a non-issue. Opportunity pricing eliminates it. Hallelujah!

Going Forward

We don’t have to stop at these three prices. Once the software is adjusted to deal with an array of prices we could add new CPXs to deal with other problems that I haven’t considered in this post.

I know this sounds like a lot of work. Every company will have to adjust their software, stats and minds to get this to work. Without considering this solution, we’ll probably continue to see discrepancy and view-ability in pitch decks for years to come, but we can move this industry. We reshaped it with Real-Time Bidding. There’s no reason we can’t do this.

Buying the (Blueberry) Farm

One of the more interesting decisions I’ve made was buying into the blueberry farm. It came about “innocently” enough. My brother and father conspired to pitch an investment opportunity in the form of blueberries.

From Email to Farm

Blueberry FarmersIt was 2006 and I was reaping the benefits of the email business I started with a partner back in 2002. We, of course, starved and scrambled to find work for the first two years, but then something hit. One of our clients, a good friend from before the bubble burst, got us pointed at an email platform. We built it, and then managed to find another client who needed one. So we licensed it, and so began our email business.

By 2006 the business was humming along. We had several clients and were expanding into other opportunities. There was a substantial surplus of cash that we opted to take out of the business. This allowed me to pursue other ventures, like farming. Internet technology and farming go hand in hand, right? Read more

How is an RTB winner chosen in the case of identical bids?

When multiple advertisers are bidding for a certain (impression) and more than 1 enter the same bid amount, (each) being the highest, how does the RTB (auction) determine which ad should be displayed.
This question was asked on quora, below is my answer.

Identical BidsIdentical bids are not unheard of, but they are rare.  Bid prices are presented as a CPM value with up to five decimal places.  That means that the actual impression can bid upon with precision down to eight decimal places.  So in that rare event, when there are two or more matching top bids, the winner is chosen at random.  This is only the tip of the iceberg, though.

Features are being added to RTB systems that allow for preferential treatment of preferred DSPs, agencies, trading desks and even advertisers.   Deals that are struck between site owners and buyers are being executed through the RTB infrastructure.  Those deals can supersede standard auction mechanics, resulting in a winning ad from a preferred partner in the presence of matching (or higher) bids from other parties.

As time goes on and the RTB system is exploited for more and more features, having equal footing in an auction will be more rare, relatively speaking.  There will always be general auctions where no bids are given special consideration.  We are, however, entering an era where premium inventory is available to buyers through RTB.  With that inventory comes a more carefully crafted environment to buy and sell.

SEO: Simple Search Engine Optimization for Small Business

Search engine optimization should be used in conjunction with online advertising to drive more users to your site.  It can, in some cases, allow a small business to reduce the month-to-month costs of advertising by bringing “organic” (unpaid) traffic to their web site.

SEO for acupuncture in ChicagoSearch engine optimization (SEO) consists, at the simplest level, of three things: knowing your target keywords, optimizing your content around those keywords and building inbound links from relevant external pages.  That doesn’t sound so simple, does it.  I’ll break down these three points and expose my experience optimizing my wife’s site for her acupuncture practice in Chicago. Read more

Small business advertising

Rather than Small Business Advertising, I was going to title this post, “Eating your own dog food,” but I decided that a more descriptive title would get the benefit of SEO.  I recently took on the task of advertising for my wife’s small business, here’s our story.

Small Business Advertising for Leslie Smith MD

Leslie Smith MD

My wife’s acupuncture practice recently moved into a larger space; her patient capacity almost doubled overnight from one to two treatment rooms.  I say “almost” because she’s still just one practitioner.  With acupuncture, once the patient has been needled, they simply rest comfortably in pin-cushion mode.  The practitioner doesn’t need to be in the room.  That’s where my wife takes the opportunity to start treatment on a patient in room number two.

I took it upon myself to do some online advertising for her practice to fill up that second room as frequently as possible.  Now, my wife is not your typical acupuncturist.  She’s an herbalist, a holistic medicine practitioner and, most uniquely, an MD.  One would think that her résumé would do the marketing for her.  That’s not the case, obviously.  We have to let people know just how fabulous she is.  So, here’s the long story of how I used my background in advertising, my wits in video production and my fabulous wife’s personae to kick off her marketing push for the new office. Read more

One bid per DSP per impression – why?

Why historically (and currently) only one single bid was allowed for each DSP per impression? Why hide demand from the exchange and create opportunities for the DSPs to arbitrage? – I know this is changing now with the possibility of multiple bids per DSP (openRTB v2) but why ad exchanges let this happen at the beginning?
This question was asked on quora, below is my answer.

One bid per impression, why?Short Answer

A multiple bid response was discussed at the very first OpenRTB meeting.  It was not seen as a favorable feature by the demand side, at first.  They preferred submitting one bid.  Supply side partners were not in a position to force the issue, nor had the necessary research been done to support the idea.

Early Days

From the supply side’s perspective, as with many transaction systems, early efforts in RTB were focused on connecting the pipes.  RTB represented a new source of demand and the pressure was applied to getting plugged in to as many DSPs as possible. Read more

Coming to a screen near you: Fewer Cookies

I wrote an earlier post called “In a world without cookies” which was my early response to the default setting in Apple’s Safari browser.  This issue has expanded such that we’ll see even fewer cookies out there, so I’m going to bring a little more light to the issue of privacy and privacy compliance in mobile, tablet and the desktop.

For the purposes of addressing privacy, the physicality of the device, whether it is a tablet, phone, or a desktop computer, can be mostly ignored.  The real technical distinctions with regard to privacy are between browsers and apps.  It’s also important to understand the need for advertising companies to maintain compliance with organizations like the NAI and initiatives like the OAB.  Together, the OAB and NAI dictate opt-out rules that online advertising companies must adhere to.

3rd Party Cookie Blocking

Block 3rd Party Cookies Results in Fewer Cookies in the Browser

Apple’s Safari browser has a default set to block third party cookies. Firefox will soon have a similar default setting.

The most prolific obstacle in privacy and compliance is probably a result of Apple’s move to disable 3rd party cookies by default in their Safari browser.  This is not just the Safari that ships on your iPad or iPhone, but all Safari browser installs, including that one on everyone’s beloved Windows machine.  Now, the team behind Mozilla’s Firefox browser has pledged to do the same.  Blocking by default causes two problems: advertising companies can’t do simple things like frequency cap using a cookie, and there’s no way to determine the user’s actual intent.  If the default setting was to allow 3rd party cookies, a user’s intent would be crystal clear if it was set to block. Read more

What are the most important KPI’s to monitor when launching a proprietary demand side bidder?

What technical, operational and campaign performance [bidder] KPI’s should be considered when ramping up, and are there any industry benchmarks?
This question was asked on quora, below is my answer.

Some bidder KPIs can be monitored with tools like graphite (not angry birds).From a technical perspective you’ll want to measure how many different types of inventory you support: mobile, app, web, video, facebook ads etc… You’ll want to track how many SSPs you’re integrated with and how many impressions are available to you. You should look into creating a feature matrix and decide which advertising features you and your customers find most important.

On the operations side you’ll want to make sure your bidding system is responding to bid requests quickly. The round-trip time for a bid response, from an SSPs perspective, should be no more than 100ms – and even that is pushing it these days. Your internal bidding algorithm should probably make a decision in less than 30 or 40ms. This allows about 60ms for network latency between the bidder and the SSP. Some SSPs have DSP latency monitoring available. This type of monitoring will give you insight into what the SSP is seeing. Read more