WTF is a Quality CPM?

This article is a WTF explainer, in which we break down media and marketing’s most confusing terms. More from the series →

For some programmatic advertisers, buying certain campaigns on a cost-per-thousand impression basis is no longer an option. It may be one of the most common pricing models in advertising, but paying ad tech vendors to display an ad one thousand times tends to reward quantity over quality, which often means ads don’t always hit the target audience. One alternative is the “quality CPM,” which agencies like Omnicom’s Hearts & Science and WPP’s Essence have invented their own versions to use in place of the CPM amid pressure from advertisers to rethink the way ads are bought programmatically.

But the interpretation of what a QCPM is, how it can be used and the metrics of success are subjective. It seems every ad business tackling this area has their own spin. Here’s a primer on what to look out for.

WTF is a QCPM?
Pitched to advertisers as a way to measure the true value of an impression, the QCPM has been around for years but hasn’t been adopted by some of the biggest programmatic advertisers until now. At its core, the QCPM is a multi-layered CPM that covers any factors that could affect campaign performance and user attention like viewability and time of day. Whereas a buyer only counts the impressions that are displayed regardless of whether they are viewable and against brand-safe content with a CPM, a QCPM counts only those impressions that are viewable and in brand-safe environments which feature frequency capping.

“Direct-response advertisers have had great proxies for value like cost-per-click but brand-focused advertisers haven’t until now,” said Marc Guldimann, CEO of Adelaide, an ad business that sells its own QCPM tech to brands and agencies. “That’s changed because there are more brands evaluating the quality of the media they buy.”

QCPMs sound good, but expensive.
Larger advertisers increasingly insist they are happy to pay more for better return on investment and a QCPM is intended to help them do that by quantifying both the effectiveness and efficiency of a buy. In other words, it’s a way to qualify CPMs are of a certain quality rather than a direct replacement to them. When one of the clients for Hearts & Science saw its QCPMs drop at the same time as its CPMs rose execs from the agency worked to dispel the myth that low CPMs in any medium, whether it be digital or linear TV, equate to better value.

A lot of the challenge for programmatic buyers stems from them being incentivized to buy from a bottomless market of cheap inventory, said Megan Pagliuca, chief data officer at Hearts & Science.“We’re talking to procurement departments about our cost per valuable impression instead of CPMs and that’s changing the dynamic of the relationship.”

How is a QCPM calculated?
That depends on the provider. Hearts & Science uses a cost-per-valuable impression, which is its own version of a QCPM that it’s pitched to clients for the last two years. The agency mixes the log-level data on impressions it gets from Google’s Ads Data Hub with data from other ad tech vendors such as demand-side platforms, viewability firms and customer data platforms to create its own version of QCPM that measures how campaigns perform. The weighting will vary in each case but typical fields tend to include viewability, brand safety and audience match.

Other companies like Adelaide score different ad units for their ability to capture attention. Aside from the size of the ad unit, Adelaide also looks at how many ads are on a screen at one time and how long the ad is in view for to generate a “quality score”. That score is then used to either evaluate the performance of campaigns or optimize strategies on the fly.

When’s the right time to use a QCPM?
For some buyers, QCPM is best suited for post-campaign measurement. For others, it’s an optimization tool.

“Although CPM is still the prevalent currency of programmatic, QCPM gives buyers more visibility into the value a partner adds to a campaign,” said Alex Bradbury, buyer development director at ad tech vendor Sovrn.

Why is a QCPM good for advertisers?
The CPM is widely viewed as an antiquated pricing model focused only on reach at the expense of other campaign goals advertisers may have. But because so many ads have been bought this way for so long advertisers have found it hard to let go. That view is slowly fading now that larger advertisers are struggling to rationalize the low costs of using CPMs with the high losses around fraud, viewability and brand safety that come with buying ads at rock bottom prices. While QCPMs won’t solve all those problems, it will give buyers more scope to scrutinize their buys at a granular level.

“You’ll always find different camps that believe that cheap inventory is better because it drives scale and efficiency, or that premium environments are more valuable despite their hefty price tag,” said Brian Leder, chief strategy officer at consultancy Promatica. “A QCPM becomes an important data point to settle that debate or at least have a more informed dialogue.”

Why is a QCPM good for publishers?
QCPMs should reward publishers with highly engaged users in brand-safe and viewable environments while penalizing those ad tech vendors trying to game the system with nefarious behavior like taking hidden fees from media budgets and selling fraudulent impressions.

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