Marc Guldimann, CEO, Adelaide
Charlie Munger’s famous quote, “Show me the incentives, and I will show you the outcome,” is only half of the story. It ignores, or maybe is a misdirection from, the real brilliance of Munger and his partner Warren Buffet, designing metrics that shape positive incentives. Figuring out the right metrics to reward — metrics that align with the interests of the business and that are difficult to game — is the hard part. What comes next is easy.
Digital media is a prime example of this phenomenon. Metrics like viewability and video completion rate have created clear incentives and predictable outcomes: The more impressions or video completions, the better. Since neither has a robust defense against gaming, publishers can create endless video completions and viewable impressions.
The challenge for digital marketers is the same as that faced by Munger and Buffet. However, a movement has recently emerged promoting attention metrics as a potential solution.
Increased video consumption gamified metrics
At the beginning of the web, some of the reported impressions advertisers received weren’t even rendering on publisher pages. Advertisers fought back with viewability, requiring an ad to be 50% on screen for a second or two. Predictably, products were built to help publishers maximize — or game — the attempted quality measure.
Then, as video consumption shifted to digital mediums, spending against online video advertising ramped up. In addition to viewability, video buyers layered on the metric of completion rate — the number of times a digital ad finishes playing.
The products dreamed up to game video completion rates were so brazen that advertisers commonly found that the totals outperformed viewability. How could a 15-second video playing through to the end occur more frequently than the ad itself appearing on screen for two seconds? As Digiday reported, vendors simply kept the video playing after leaving the screen.
Metrics like viewability and completion rate created predictable incentives. And the outcomes were just as foreseeable — a deluge of display placements and tiny video players.
This creates a problematic situation for premium publishers, as the actual quality of placements isn’t reflected in the price. A hard bargain emerged; publishers could either sacrifice their readers’ experience or lose revenue to publishers willing to do so.
Defining and measuring media quality can level the playing field
An equally tricky situation exists for media buyers whose clients have tasked them with finding the cheapest viewable impressions and video completions. While most know they aren’t getting the best value for their clients by optimizing this way, they are often incentivized to do so all the same.
Tiny video players with inherent high viewability and completion rates command higher CPMs than large video players with lower viewability and completion rates. These incomplete measures of quality fail to consider a placement’s contribution to business outcomes, resulting in inaccurate calculations of media value.
Other markets have fixed this problem by adopting metrics that are harder to game and more closely connected to outcomes, like how Carfax resuscitated the used car market. With media, some companies are realigning buyer and seller incentives around value by increasing the transparency of media quality.
But how is the quality of media defined? A growing body of research points to attention as the leading indicator of media performance.
Attention metrics take into account thousands of media quality signals, and most importantly, their weighted contribution to outcomes to reveal a multidimensional perspective of quality that moves beyond binary metrics. From there, advertisers can factor in cost data to calculate media value — and understand when they’re getting a fair deal.
This transparency, the ability to identify precisely which domains, formats, and placements possess the highest level of value, empowers meaningful optimizations that maximize ad spend and increase ROI.
While quality takes different forms on every medium, attention metrics generally incentivize publishers to create fewer, higher-quality ad placements and buyers to place greater value in them.
As the industry embraces attention metrics, it begins to solve the complex problem of incentive design. Buyers who incorporate accurate measures of quality into their media value calculations will create positive incentives for quality publishers and promote better business outcomes for themselves.
Finally, this positive feedback loop between buyers and sellers levels the playing field and establishes a vital component of any healthy market: A shared understanding of media value.
Sponsored By: Adelaide