Accounting for Time in Online Ad Pricing

December 15, 2014

In the world of online advertising, the “click” is king. That’s because nearly every major website bases its ad rates on the number of hits it receives over a specific span of time. The idea is to attract potential clients by emphasizing how much traffic the website receives. But just because clicks act as currency in mobile marketing doesn’t mean that they’re reliable indicators of an ad’s effectiveness. After all, a person could have spent ten seconds or ten minutes on a particular webpage, but the only thing a click will tell about them is that they visited the site.

In the eyes of some critics, it makes more sense for companies to measure the amount of time people spend on a site rather than simply tallying their clicks. In a way similar to how TV networks dole out ad space in 30-second slots, websites could also extract value from the innate scarcity of time. “You’ve only got 24 hours a day per person. So what you’ve got is a constrained resource: time,” said Tony Haile, CEO of the digital analytics company Chartbeat. “That directly correlates with the goals of advertising. Just like any economy of scarcity, anyone who captures most of it can charge more.” A number of Internet media companies like Gawker and Upworthy already track these “attention minutes,” but neither relies on them to determine ad rates.

As of October, though, the Financial Times does. The London-based newspaper recently switched to a cost-per hour (CPH) measurement of its traffic rather than the traditional cost-per thousand impressions (CPM). Now the company tells advertisers how many hours their spots will appear in front of their target audience, giving the client a better idea of how their money’s working for them. Still, don’t expect this trend to take off on other media websites. The Financial Times brings in most of its revenue through subscription sales, allowing it to experiment with its traffic measurement model. Ad sellers and buyers who have been using the CPM system for more than 20 years are more reluctant to change.

 

Questions:

  1. Does measuring ad rates on a cost-per hour make more sense for ad buyers?
  1. Will more media companies begin to track “attention minutes” on websites?

 

Source: Michael Sebastian, “Is Digital Advertising Ready to Ditch the Click,” Ad Age, September 29, 2014. Photo by: H Is for Home.

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