“CPE” What is it and why it might bury “CPC”

“CPE” or “Cost per Engagement” is more and more present in our advertising vocabulary, but what is it? Why adding more acronyms to the ones we already had …we used to have CPM, CPC, CPL, CPA, CPI, and now CPE!

But what is it really? Why is it important, and above all…has it come to stay? Or will it fail?
Too many questions that are yet to be answered, let’s start by defining the concept

CPE: “Cost per engagement”, originally this term was first used in 2006 by an online solution provider who was interested in bringing more accountability to brand units. Nowadays, it’s widely used by many publishers who are not only looking to differentiate from others but also to update into new business models. But what it means? Basically it’s a model in which the advertiser doesn’t pay for each ad space, but for a specific action or engagement, such us:

  • If the user hovers over the ad and the ad unit open up to display a specific creative.
  • If the ad is in the form of a product tour or a survey, and the user either takes the survey or takes the tour.
  • Online games in the form of ad.
  • Watching a video.
  • Facebook likes.
  • White paper downloads.
  • Other engagement options that are specifically valued by the advertiser.

So, it looks like a great option for advertisers where they can measure their ROI effectively and allocate their budgets according to their business needs.
What is more, everybody is aware that in the past few years, the famous CTR for banner ads has been falling each year and what is worst…just like Comscore’s Charter Study found, only 1/3 of display ad impressions served in 2011 never had a chance to be seen by users!

So the business needs changed and the CPE broke through as a possible response for those demands, they needed something to make sure that their business goals were moving forward, especially for advertisers that are very concerned on their brand attributes or purchase intent.

Now… who’s able to offer this kind of business model? Is it a good deal for publishers to give away their ad spaces for free until an engagement is made?
Of course this is not an easy answer, and that’s probably the reason why CPM will always be on top of each model. You have to be very aware of your audience and their behavior since you really can’t guarantee engagement to just any ad campaign, it will always depend on the effectiveness of the specific campaign that’s being published, so it’s still an area to be explored and not just anyone can offer this tempting business model.

Who’s able to offer this engagement based model? Probably one of the leading groups is Video Networks, they have the big power of audio and video to caught the attention and one of their most popular business models is cost per view, which can be consider a part of CPE business model. But in this particular case, advertisers have to be aware and measure their results, sometimes is not only a matter of someone viewing your video, but to see if the audience watching is the right target for your campaign!
Another group would be value exchange networks and specific publishers like famous apps or direct publishers that can offer something in return for the user to do the required action, such as offering free in-app benefits, virtual currency or a certain prize for the user.

Another group includes value-exchange networks and publishers.  Through the value- exchange model, users are offered something of value in exchange for their attention, allowing these networks to consistently deliver on engagement-based goals.

Twitter is a very good example of a company selling their traffic using this method. They expanded the old CPC model to the CPE, simply because CPC was not enough…why would clicks be more valuable than other types of engagements such as follows, retweets, favorites, etc.? CPC was a thing that belonged to the past, of how display traffic was measured and controlled, but nowadays it doesn’t need to measure all performance.

The advertisers objectives have changed, they are much more diversified and CPE is there to answer those demands.

 

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