Cost Per Hour: Time-Based Advertising

This post is a summary of 'Cost Per Hour: Using a Time-Based Currency for Digital Advertising'. Click here to download the full paper or use the link below:
http://www.slideshare.net/NikulSanghvi/cost-per-hour-using-a-timebased-currency-for-digital-advertising

In 2014, global spend on display ads reached $52bn. The majority of this spend is likely to have been traded on a measurement method called CPM (Cost Per Mille – in Latin mille means thousand). Using CPM, advertisers pay per thousand impressions that are served. An impression, as an advertising term, is used to describe an event where the ad is fetched from a server. When commercial opportunities revolve around this volume alone, publishers use impressions as a proxy for success.
Media owners who focus solely on impression volumes to monetise their content, can neglect to value the quality of traffic. Volume-driven strategies often pursue irregular traffic spikes such as those that are created via click bait. Artificial page impression boosting techniques are also used to create additional ad server calls. Many of you will have seen slideshows that require clicking through 15 HTML pages to view a dozen images. Or how about text articles, where the content is purposely split out over five pages? This ‘quantity’ game started as a way of making more money from ads almost 20 years ago. These outdated tactics still exist on the internet today and are often unfriendly towards user experience.

For advertisers, this means that it isn’t necessarily a human who has seen their advert. In fact, more than half of impressions served aren’t seen by anyone at all. To tackle this issue, the Internet Advertising Bureau (iAB), a regulatory trade body, introduced guidelines for an ‘advertising viewability’ standard – which stated that for an ad to count as viewed, at least 50% of its surface area has to be shown on screen for at least one second. The Viewable Impression was an important improvement over the standard impression. It introduced a minimum standard for measuring impression quality.

The iAB standard doesn’t yet differentiate between ads seen for different lengths of time. All ads viewed are still valued equally – whether they’re viewed for a second or a minute – but at least advertisers have the option to only pay for ads that are seen.
Serious publishers and media owners should be able to focus on producing high quality content – instead of worrying about traffic volumes. In return, they should be rewarded for having loyal and engaged readers. The question is, how can advertising spend be connected to this way of thinking? 

In April 2014, I started a new project at the Financial Times to help the Commercial Strategy team find new ways to use their data. Working with Thomas Ward and Alistair Smith, we set out to answer the following questions:
For an ad that is in view, does exposure time have a positive relationship with branding outcomes? If the answer is yes, how should a publisher productise, price and sell time instead of impressions? 

The analysis and research that followed, led us into developing a new trading currency: Cost Per Hour (also known as CPH).
To date, the currency has been sold to more than 10 global clients, including Microsoft and BP, generating over $1m in additional revenue for the Financial Times. It has also won numerous industry awards, including Best Use Of Commercial Data (Silver – British Media Awards 2015) and Most Innovative Publisher (Drum Digital Trading Awards 2015). 

The measurement system works by only counting the time that an ad is in view and the user is actively engaged with their device. The pricing methodology works by converting the CPM value of those impressions into a CPH value. The final product design ensures that the client always gets a better eCPH through a time-based deal than they would normally get via CPM. Using predictive targeting systems, the time can be delivered in fewer impressions – resulting in inventory efficiency and yield gains for the publisher.

CPH was built to be transparent. This whitepaper, which I have written, in my spare time and independent of the FT, shares everything that I know about the project – and shows that data sits at the heart of it.
The decision by the Financial Times, to allow me to openly share these detailed inner-workings, is a testament to its innovative approach and boldness.

Within the document, I have tried to address key points on subjects such as product design, pricing methodology and operational workflow. The focus has been on providing a practical solution to catalyse a movement for publishers (and media owners) towards using attention-based advertising metrics.
As with many other interesting problems, the process of finding a solution presented more questions than answers. The route to an attention-based economy is pebbled with organisational change and requires industry-wide investment (both time and money).

CPH may not be the final solution, but building this time-based currency was a fascinating starting point. As a trading method, Cost Per Hour (CPH) stands up and fights for a sustainable publishing industry where quality content and reader attention matter more than ad impressions and clicks.

Comments, feedback and criticism are all welcome.