By David L. Smith, Mediasmith Founder & CEO
Almost 20 years into Web marketing, too many advertisers are basing success on click based metrics. In today’s world, the astute advertiser is looking at success based on ROAS (return on advertising spend) which is displacing ROI as an ideal metric. I like to call this CPW or “cost per whatever” the advertiser is trying to measure.
Why CPW is important
CPW is a back end metric, while clicks are a front end metric and incomplete at that. While clicks, view through and engagement are important concepts at the front end, what really matters to most advertisers is selling product, raising awareness or causing the consumer to perform some type of action. The closer we can get to “whatever” the advertiser is trying to accomplish in our metrics, the better off the advertiser and the industry are.
I first wrote an article on CPW in 2001. We had been using this term at Mediasmith for several years and thought that we needed to put a stake in the ground on the term. Since that time, it has been used by select people in the industry but only recently has gained broader acceptance as the industry strives for metrics that can be understood by all.
What is CPW? It is simply “cost per whatever” the advertiser is basing their ROAS on. This can be cost per sale, cost per download, cost per sign up for a newsletter, whatever metric means success. It could be an action such as registration or purchase; it could be a passive measure such as pageviews or unique users. Cost-per-pageview has proven to be an especially effective measure for media whose whole model is selling advertising on their site. In effect, they make money on the spread between the difference in pageviews that they sell and pageviews that they buy. Or it could be based on brand lift, utilizing tools from Nielsen or other companies.
CPW can also apply to more sophisticated metrics. For instance, an advertiser may wish to evaluate a visitor not on their first visit, but may want to try to emphasize sites and creative that brings back visitors multiple times. We had one client that believes that visitors are only valuable if they come six or more times to the site. In this case, we would measure repeat visits and place future dollars on sites that do the best job of bringing consumers who are frequent visitors. If a confirmation page on a web site can be dedicated to the action, this action can be the “W” in CPW.
We all know (or should know) by now that CPC needs to be replaced as a success metric. Yes, it is still a method for selling ads but we have the ability to evaluate success far beyond the initial action. . Clickthrough rates, once the hallmark metric of Web success, have proven to be largely irrelevant and it is time we moved on. Actually, they have been irrelevant for years but the success of Google has made this metric pervasive. The web has taught us however that the old method of computing what media costs does not make a lot of sense. What does make sense is how much it costs to drive success or ROAS.
Time-tested analysis has established that there is very little relationship between clickthrough rates and success of a Web campaign. View through and engagement are all components and a good piece of analytics will include all three on any front end measurement. We are not suggesting that CPW be a basis for payment. Although we do expect that some sites will offer this as back-end tracking becomes more sophisticated. There continues to be talk about systems that could not only eliminate the need for third party ad servers but could give the seller as well as the buyer visibility on view through and associated conversions. This would be a breath of fresh air for all as too many networks still have to optimize on clicks as the only action that they can see. CPW should, however, be the basis for evaluation of sites and creative. After all, isn’t it all about the advertiser and ROAS?
Now we recognize that the concepts above are not necessarily new but could be called simply a new label on something old. But sometimes names are everything in achieving clarity in communications. Some people call this method CPA. But since CPA is also a method of selling, we find that the use of CPA to describe back end evaluation sends the wrong message in analytics wherein some readers of a report do not understand that the underlying buy is, in fact a CPM buy.
Lastly, the use of the term CPW injects a little smile when someone first hears it. And any analytics conversation can use that.