Category Archives: Advertising

Facebook Advertising: The Power of CPM

Facebook by Ray-Franco Bouly, on Flickr

Facebook advertising is becoming a necessity, not an option, especially in regional and local markets. Ease of use and the ability to target geographically and behaviorally are benefits associated with using Facebook for advertising, as is reasonable cost-per-click (CPC) or cost-per-thousand (CPM)  pricing. Which of the two options (CPC vs. CPM) should you select? The answer is easy – it depends on your advertising objectives.

The default option when advertising on Facebook is CPC. If your goal is action, for instance to stimulate click-throughs to a custom landing page for data collection or sales, then CPC may be the best option. If the goal of your advertising campaign is exposure and/or branding, then CPM may be your best option. To compare the two, I devised and ran two small test campaigns, both with the same goal: to drive traffic to a business fan page in an attempt to increase the total number of fans.

The results were interesting and somewhat mixed. The outcome of the CPC campaign was not overly impressive, although the end cost was reasonable on both a cost per click basis (75 cents) and in total. Over a five day test period, fan page “likes” increased by four. Personally, I found the metrics generated by Facebook for CPC campaigns to be rudimentary and less than adequate. That is, I desired more information than what was provided.

Using a similar ad and employing the CPM option yielded much better results overall, but at a higher cost per click. The metrics provided when selecting the CPM option were much more desirable than the default metrics provided when selecting the CPC option. The table below shows the results of the second test campaign.

SecondFanCPM

The second campaign resulted in over 500,000 verified impressions when targeting Facebook users 18+ located within 25 miles of the business over a ten day period and 34 clicks. The 34 clicks resulted in 28 additional “likes” on the fan page for a conversion rate of 82.35 percent. So although the CPC rate is higher ($1.47 per click), the benefit of selecting the CPM campaign is apparent when taking the motivated states sequence into consideration (attention/awareness, interest, desire, action). Where else can you reach 1,000 people, targeted geographically and behaviorally, for 9 cents?

Please keep in mind that the two campaigns are as presented: small trials to see which option is preferable.  No A-B testing for ad copy or graphics was performed. But based on the results achieved, the best option (in my opinion) is CPM because of the metrics provided and the full consideration of the AIDA objectives. To be effective, you’ll need to run a variety of tested advertisements with frequency.

How do you plan to use Facebook to advertise your business?

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Watch Me: The Growth of Internet Television in the U.S. Market

Television by *USB*, on Flickr

Is 2010 the year that internet television goes mainstream? Evidence exists to suggest that we’re well on our way to adopting internet television as a viable alternative to broadcast, cable and satellite television. According to recently released statistics, there are 240 million people in the USA using the internet (77 percent of the total population) with 66 percent of total US households accessing the internet via broadband. Of the 240 million US users, 84.1 percent watch online videos of some sort yielding a total of roughly 202 million US users who are favorably predisposed to watching video online. While YouTube continues to dominate the online video viewing marketplace, Facebook is making significant gains in total video views. But what about internet television? How is it growing in the US marketplace?

Hulu, the top online television provider in the US, reports a total of 30 million users, representing 12.5 percent of all US internet users and 14.85 percent of all US online video viewers. To be certain, current versions of internet television contain limitations regarding content availability and quality, but the perceived limitations are decreasing annually. As more people adopt and use internet television, a safe assumption is that advertising dollars will follow. Although concrete figures for the amount of advertising revenue generated by all US internet television providers remains difficult to ascertain, the growth of the top internet television provider serves as a surrogate for the industry’s potential. Since 2008, Hulu has reported a compound annual growth rate in total advertising revenue of 209.84 percent, beginning with $25 million in 2008, hitting the $108 million mark in 2009 and estimated to reach $240 million by the end of 2010. Hulu launched as a free service, but is now offering subscription to premier service, HuluPlus.

Hulu Ad Sales Growth Rate

Netflix, a subcription-based provider of online movies and television content, is expected to reach 19 million users in the US marketplace by the end of 2010, representing 8 percent of the total US internet users and 9.4 percent of all US online video viewers.

Other online television and movie content providers worth mentioning are Boxee and Ziggy TV. The former, like Google TV, offers a control box that can be hooked up to a high definition television and broadband cable access to allow viewers to watch online television on their regular television sets. But unlike Google TV, you can access Boxee via your laptop and/or mobile device. Boxee provides access to movies via Netflix as well as television content via Hulu (much to Hulu’s dismay). In my opinion, it is one of the better options available for online television access. Ziggy TV offers access to multiple types of media, but when I ran it on my Windows 7 laptop, it was a memory hog (even with 4 gigs of RAM) and slowed down my machine considerably. For Mac users, AppleTV offers access to online video content for different subscription rates. Boxee integrates well with AppleTV.

Google TV has launched and is targeting the mainstream television audience. Like Boxee, Google TV is delivered via a control box that you hook up to your television and broadband access. Unlike Boxee, Netflix, Ziggy TV and Hulu, Google TV is not accessible via your computer, laptop or mobile device. This may limit the overall appeal of Google TV and thus, the total number of users. Instead of choosing to compete solely via traditional television, Google TV should deliver its content in all potential viewing platforms. In my opinion, this is clearly a mistake in the strategic positioning of Google TV.

Finally, if your goal is to access online television via your regular television set (as with Google TV), think about looking into Orb TV. Orb TV provides access to Hulu, Netflix and other online video sources but uses your iPhone or Android phone as the TV remote control. Boxee provides this same feature (iPhone remote app).

In summary, as more US internet users switch their television and movie viewing to online and mobile platforms, advertising dollars are bound to follow. To ignore the opportunities provided by online and mobile television/video advertising is foolish.

How do you prefer to access and watch movies, television and video content online?

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Agency Compensation in the Social/Mobile Marketing Era

Paperwork from kozumel“It was the best of times, it was the worst of times…” – Opening line of A Tale of Two Cities

Billing in advertising agencies used to be relatively easy. We lived on a 15 percent media commission and a 100 percent or greater (1 x 3 was not beyond the realm of reasonable practice) mark-up of services rendered. Current billing practices are in flux as we move from commissionable media to noncommissionable media and from traditional outbound marketing to inbound marketing as the dominant paradigm in the industry.

What are some of the most widely used agency billing practices today? The easy answer is – “it depends”. It depends on what type of agency you’re working with (full service, specialty, etc.) and the media choices employed. The only common factor across agencies and media is that the commission model (described in the opening paragraph) utilized for 100 years or more is no longer viable from both an agency and client perspective. The beginning of the end of the traditional agency compensation model is attributable to the emergence of the internet, the proliferation of personal computers and the increasingly fragmented television market. All happened simultaneously around 1994. Agency compensation began to shift from commission-based to fee-based soon after and refinement of the new agency compensation structure continues.

In general, agency compensation models fall under one of three dominant paradigms: behavior-based, outcome-based or hybrid compensation models. Behavior-based compensation models are more commonly known as fee-based models. Outcome-based compensation models are more commonly known as either incentive-based or pay-for-performance models. And hybrid compensation models provide agencies with the ability to structure compensation utilizing both the behavior-based and outcome-based approaches.

Behavior-Based Compensation Models:

Fee-based compensation models indicate a movement towards billing clients in the manner that other professional services use: fees based upon time, effort, expertise, etc. In this regards, billing is approached in a similar manner as public relations firms and law firms. In my opinion, large agency advertising billing is adopting the structure of public relations firms, including the “retainer” or agency fee. Options under the fee-based compensation model include fixed (project-based), hourly and cost plus billing. Fixed billing charges one price for a project or service. The downside for the agency is that disproportionate amounts of time can be spent on similar projects (think “customer-from-hell”). Hourly billing is more accurate from the agency perspective, but can be considered too expensive by the client. Cost plus billing offers a tie to the past in that the cost of the time, materials, media, etc. are summed and a desired agency profit margin is added as negotiated with the client (typically based on the client’s perception of the expertise, reputation and or perceived value-added of the agency).

Outcome-Based Compensation Models:

Compensation under incentive-based systems allows for pay-for-performance. The key to managing pay-for-performance is having a mutually acceptable, reliable, accurate and independent source of metrics available for measuring advertising performance. Inbound marketing by its very nature provides an opportunity for incorporating incentive-based compensation into the agency-client relationship. The key question thus becomes “who is responsible for the cost of under-performing campaigns”? From an agency perspective, the client should pay for all costs associated with the campaign including media placement. The client perspective, as one might imagine, is the converse. To be fair, incentive-based agency compensation has to be based on a cost-plus model (the hybrid compensation model).

Hybrid Compensation Models:

Hybrid compensation models combine aspects of both fee-based and incentive-based models. As described above, one of the most commonly used hybrid compensation models is a cost-plus model where the “plus” is a pay-for-performance agreement. The difficulty becomes one of monitoring performance based upon mutual agreement, trust and transparency. In my opinion, the hybrid compensation model has the best chance of emerging as the dominant agency compensation model.

Interesting Specialty Models:

But what if your agency specializes in pay-per-click (PPC) advertising placement and management – how do you bill for those services? I believe that the hybrid compensation model remains the best approach, but other innovative models are being utilized including the ala cart model (pick the services that you want based upon the monthly price that you’re willing to pay) and the three-tiered model (base/percent/ceiling). The three-tiered model sets a low end ala cart foundation (e.g, a minimum buy-in of $2000 per month in PPC campaigns using x keywords across y search engines pointing to z unique landing pages), an acceptable percent of total advertising dollars spent in the middle (agency fee) once monthly PPC expenditures reach some negotiated total dollar volume, and a maximum ceiling for large volume accounts (e.g., maximum charge of $10,000 per month to perform premium PPC services). The three-tiered PPC model provides PPC agencies with a secure base and clients with a ceiling limit for monthly expenditures.

Summary:

From an agency perspective, it is the best of times. Never before in our history have we had access to such targeted media and unique, measurable, ways to reach consumers. And yet it’s the worst of times because billing and compensation practices have become increasingly complex and contentious.

In your opinion, what will become the dominant agency compensation model of the future?

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