• by Ran Cohen , May 23, 2012

Have you been basing your ad buys on “effective cost per thousand impressions,” or eCPM? The problem with using eCPM is that, while the cost may be effective, the impressions themselves aren’t necessarily so.

Wouldn’t it make more sense to use “cost per effective impressions,” or CPEM?

To arrive at the traditional eCPM, you divide total spend by total number of impressions, and them multiply by a thousand.  It’s a simple average of costs.

For the new CPEM, you divide eCPM by the following: rate of correct audience times rate of correct frequency times rate of impact.  It’s a method that helps you understand the real value of every impression.  Here’s the actual formula:

eCPM

_________________________

audience x frequency x impact

Let’s break down the CPEM parameters:

• Audience – It doesn’t make sense to deliver a retirement campaign to high school students, or an ad for a feminine hygiene product to grandpas.  Delivering ads to the wrong audience creates waste.  The further you are from your primary and secondary targets, the larger the waste.  In the examples above, every dollar spent is wasted. 
• Frequency – Both overexposure and underexposure to ads also equals waste. For example, after seeing thousands of Geico ads recently, I’ve certainly gotten the message that 15 minutes can save me 15% or more on car insurance -- and serving another ad to me would most likely be wasteful. On the other hand, if I will not be exposed to any Geico ad in the next 12 months, there is a good chance Geico will not be top-of-mind when I look for car insurance.
• Impact can be determined by contextual quality and creative quality:

o      Contextual – Consumers are less likely to be interested in ad messages if their state of mind is not right. Movie previews are very appropriate when I’m in the theater, but less so when I’m working in the office on job-related research.  Also, discrepancies between advertised products and the environment can create a negative effect – for example, imagine seeing a luxury car in those urinal ads found in bars.  In online media, quality and context are best achieved through relevant, premium content.

o      Creative  -- The more senses involved, the better. Adding images, movement, sound, video and interactivity make messages stronger. Larger ads and longer duration attract more attention. Online ads below the fold that nobody sees have zero value. Standard ad units with no movement, sound or interactivity are not as strong as ads that include video, expansion units and other interactive options.

So how do you apply the right audience, the right frequency and your campaign’s impact to figure out how much an effective impression really costs?  In other words, how do you find your overall CPEM?

You eliminate every impression that brings no value, such as wrong audience, wrong frequency, and ads that aren’t viewed.  For example, if your CPM is $5 and 50% of the audience is outside your target audience, the CPEM is $10; similarly, if 50% of your impressions are over-frequency or under-frequency, the CPEM is also $10.  What if you have both 50% audience waste and 50% frequency waste?  Your CPEM jumps to $20.  Add in, let’s say, a 10% rate for unviewed ads, and your CPEM becomes $22. 

The challenge for marketers is to decrease the CPEM by buying and managing campaigns in a smarter manner. Always check these three factors:

• You’re serving your ads to the right audience
• You have a way to monitor and control the frequency on a user level
• You’re including in-view, high-impact ads.

The technologies in today’s digital advertising environment allow you to become very effective in controlling all these elements. Leveraging such capabilities allows every dollar you invest to work harder. In other words, less spend will get you better results.

That’s what I call effective!