The rapid rate of change in online media is one of the things that makes the business fun. But not everyone is able to keep up. Much of the advertising industry is mired in the past. Can you believe that halfway through 2010 companies still spend major ad dollars against numbers based on sample surveys?

Here’s another example. Traditional media buying and planning is based on CPM (cost per thousand impressions). This model was developed for old media that wasn’t – and still isn’t – trackable.

The Internet, of course, is trackable. So, why would an advertiser pay for “impressions” (the number of ads flashing before consumers) when he or she can pay for actual consumer interest and engagement? The consumer engagement model has worked out real well for Google. Their AdWords program charges advertisers only when someone clicks; impressions are considered meaningless and are therefore free.

Years later, Facebook, LinkedIn, and others are jumping on this bandwagon, but the industry at large is still happily tabulating CPMs for online campaigns and then hoping the ads are effective enough to generate engagement in the form of clicks.

By and large, they’re not. I won’t waste your time with some stat (probably generated from a sample) about abysmal average industry click-through rates, but suffice it to say that the number is far to the right of the decimal point.

Allow me to demonstrate.

Let’s compare a $150,000 ad buy at a $4 CPM to a $1 CPE (Cost Per Engagement, where an “engagement” could mean a video view, a Web visit, or another action).

$150k buy at $4 CPM

  • 37,500,000 impressions
  • 56,250 clicks (we hope, assuming .15% click-through rate)

$150k buy at $1 CPE

  • 100,000,000 impressions
  • 150,000 clicks (guaranteed)

So you see, on a dollar-for-dollar basis, consumer engagement campaigns deliver significantly more value than CPM – they even deliver more impressions!

Engagement campaigns have other benefits for advertisers, too. The results are guaranteed, so ads are displayed until they hit their numbers, rendering click-through rates meaningless. This model, you see, puts the onus on the publisher or distributor to deliver value.

When the first major brand mandates that its entire online media spend must be purchased on engagement, and the savings run to the millions, the rest of the industry will follow.

This is just one example of how the ever-evolving online media landscape can benefit advertisers, if they choose to take advantage of it.

Author: Mitchell Reichgut is CEO of Jun Group, the video distribution partner of choice for Fortune 500 brands, agencies, and major entertainment companies. Jun Group guarantees millions of US-based video views on mobile, P2P, Facebook, and YouTube. Every view is user-initiated, and data is tracked down to the second and delivered in real time via an online dashboard.

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CPM, eCPM, dCPM, eCPA Metrics in Media