Ditch the click?

In my role during my internship this past summer, I spent time learning about advertising for media publishers as I was working at The Wall Street Journal. I kept hearing the terms “CPM” and “Click-Through Rates”. CPM is the basis by which the majority of digital advertising is sold (CPM means cost per thousand impressions). Essentially, the more eyeballs a publisher has, the higher it can charge advertisers. But now, some digital content providers are thinking about other metrics, such as time. A recent article in Ad Age really resonated with me, and I am commenting on the article in addition to Teal & Miguel's posts (which I had not seen prior to writing this in Word on my laptop - oops!).

In March 2013, Jon Slade – commercial director of digital advertising and insight at the Financial Times – presented the idea of time as a currency to the paper's Asia sales staff. In October, the Financial Times will be rolling out ad rates based on time rather than impressions. This means that they will charge advertisers by the number of hours the ad spends in front of targeted readers – this rate is called CPH (cost per hour). "We're definitely challenging the status quo. No one has come up with a new currency in digital advertising in -- a while." said Mr. Slade.

Challenging the status quo is important for publishers these days. While ad revenues in the US last year were $43 billion, 70% of these revenues went to the top 10 ad-selling companies (like Google, Yahoo, and Facebook). Large ad networks take much of the remaining revenues, which leave publishers struggling.

Over half of FT’s revenues come from subscription revenues – and 2/3 of these subscriptions are digital subscriptions. While publishers like FT may have smaller audiences than other websites, these audiences are more affluent and spend more time on their site. This is why attention metrics – like time and CPH – may make more sense.

I think an interesting quote was one made by Tony Haile, CEO of Chartbeat, a digital analytics company that was recently accredited to measure ad viewability by the Media Ratings Council, a standards organization. He said: "Time is the only unit of scarcity on the web. You've only got 24 hours a day per person. So what you've got is a constrained resource: time. That directly correlates with the goals of advertising. Just like any economy of scarcity, anyone who captures most of it can charge more."

There are many players who would rather keep the current order, such as agencies and publishers with larger audiences. The current system seems to work quite well for them. In addition, critics question whether more time on a screen would even help an advertiser. Readers are more or less trained to ignore banner advertising, regardless of how much time they spend on a screen.

Looking at other metrics, click-through rates are still used to measure reader engagement. Many publishers and media buyers have sought to kill this measure, but it is very difficult. I had the pleasure of meeting Romy Newman, head of digital advertising at The Wall Street Journal, this summer. In the article, she recalls an ad campaign that ran 18 months ago for an enterprise-technology company that targeted chief technology officers. "It's probably an audience that doesn't have a high propensity to click" she said. WSJ measured click-through rates and canceled the campaign 2 weeks later citing lack of performance. However, WSJ reviewed attention metrics and found another story: their ads were in view to their target CTO audience for an average of 56 seconds, which was a success in their minds.

It will be interesting to see how metrics will change for digital advertising in the near future.