Artificial Intelligence Marketing Blog
November
8
2016

oren2

by Oren Langberg
Lead Solutions Engineer

Is Cost-Per-Hour a Reality in Programmatic?

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As big-name brands start experimenting with the new cost-per-hour metric, the advertising marketplace may be headed for a major shift.

Last year, the Financial Times (FT) formally announced the launch of a new time-based measurement in digital advertising. The publisher anticipated that the cost-per-hour (CPH) metric would replace the traditional cost-per-thousand (CPM) one, which only measures the number of times an ad is clicked — a measurement that the FT felt was rudimentary and insufficient in today’s advertising landscape.

Since that announcement, the FT has already run trials with ten clients, including giants like BP, Microsoft, and IBM. Given the success of those tests, FT hopes more publishers will get on board with time-based metrics, according to the Drum. As the number of publishers using CPH grows, it would almost certainly move into the programmatic marketplace and give CPM the run for its money that the Financial Times envisages.

Bots and Consumer Distrust Plague the Programmatic Market

Since the dawn of digital advertising online, marketers have relied almost exclusively on one measurement to determine an ad’s value: the number of impressions (or clicks) it gets. Out of this metric came a marketplace where companies could buy those impressions, a marketplace that has functioned more or less unchanged for three decades. Recently, however, glaring problems have emerged, with ad fraud, consumer distrust, and a lack of transparency plaguing the industry.

Experts have predicted that ad fraud will cost companies $7 billion in advertising money this year alone, with bots accounting for up to 61.5% of website traffic. At the same time, banner blindness is at an all-time high, and viewability at an all-time low — 0.1% click-through-rates on display ads, to be precise, or roughly one click for every 1,000 ads.

Why Cost Per Hour Could Work

The Financial Times has developed the cost-per-hour metric with the promise that it offers “better and more measurable brand impact,” as the FT’s VP of Advertising for the Americas Brendan Spain wrote for the International News Media Association. Rather than trading impressions, companies trade “in blocks of time,” paying for a target audience’s attention.

This has measurable results in ad recall, brand familiarity, brand favorability, and brand consideration, says Spain, with ad recall increasing 79% when an ad is seen for more than five seconds. Moreover, CPH “ensures 100% viewability of five seconds or more” and FT’s trials generated over $1 million in incremental revenue for its clients.

“Most importantly,” continues Spain, “CPH allows us to shift our focus to delivering quality over quantity, by using data analytics to create higher‐performing placements.”

Making the Transition

It could be a while before time-based metrics are as pervasive as CPM, though CPH’s growth has already proven substantial: when FT first introduced the metric in 2014, just three CPH campaigns were purchased. That number increased to 21 in its second year, and 16 CPH campaigns were launched in the first half of 2016 alone. Nonetheless, there remain obstacles in the path of this potentially transformative new metric to programmatic dominance.

As effective as CPH advertising is, CPM ads are still a lucrative (if inefficient) investment for publishers and advertisers alike. For example, CPH ads account for just 5-7% of FT’s impressions, and it may take some time before other publishers are willing to invest in cost-per-hour ads. Media planning and buying giant CARAT USA, meanwhile, is worried that there simply isn’t enough “quality content” getting traded on that metric, as the Huffington Post reports. Until that kind of content is readily available, companies will continue to primarily rely on current viewability measurements.

But other major publishers are already seriously considering CPH: BBC Worldwide, the New York Times, the Guardian, and several other major newspapers have met with FT to discuss their own time-based models. Thus, it seems as though it’s only a matter of time before CPH firmly establishes itself at the head of the programmatic marketplace.

Check out more industry insights and news from the experts here.

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