What are advanced media pricing models?

digital media pricing modelsYou’re now likely familiar with a variety of both offline and online media pricing models. But still, you might be wondering what an eCPM is? Why is it used in a particular instance and not in another? What is a hybrid media pricing model? This post will address these more advanced media pricing models.

Hybrid: What’s a hybrid pricing model? Quite simply it is when you (buyer and seller) agree that the intended media will be bought on an algorithm of more than one pricing model. A simple example would be a lower than rate-card CPM plus a cost per acquisition component. A hybrid pricing model can really be a mix-match of any 2 or more pricing models, granted both buy and sell sides agree to it. This further requires that measurement be reliable and available to both parties to establish trust and eventual billing. The problem with a hybrid pricing model is they are complicated to track and throw into the mix more elements where discrepancies can legitimately arise – causing disagreements and complicated payment resolutions. I avoid them altogether personally. I prefer finding the one success metric important for the client, that’s measurable, and price on that.

eCPM: eCPM is a term that most everyone in digital is aware of. However it is all too often wrongly used. It is actually not a pricing model at all, but a reporting metric. It is the effective CPM of a campaign, or sub-campaign executed with a media partner. When used as a pricing model, the buyer will tell the seller what their expected eCPM is and the seller will propose a plan with formats and placements that are above and below the expected eCPM. The end result of the proposal is that the eCPM is met – when dividing total impressions (by a thousand) by the available budget. Each placement has its own placement. Or the eCPM is presented at the bottom of a global media plan where the agency shows their client what the global CPM is for the entire campaign, thus averaging out the expensive and cheap placements. eCPM is good to compare campaigns with each other and see how well you are negotiating.

dCPM: dCPM will sound a lot like eCPM but this is a pricing model and not a reporting metric. A dCPM is your target CPM, what you (buyer) wish to pay (say $5 dCPM). dCPMs are used predominantly in bidding environments such are real time bidding. Here instead of working with a ceiling or floor CPM, you are looking to spend a particular price point on average (say $5 dCPM). In this scenario, your actual CPM will fluctuate far up and down but must constantly average out at the dCPM which at the end of the campaign turns into your eCPM – the result.

“e” vs “d”

You will also encounter from time to time any number of “e” or “d” pricing models. Keep in mind that the “e” is “effective” i.e. the end result, which is another way of saying a reporting metric, to compare with other similar actions or campaign. Keep in mind as well that “d” stands for dynamic which means you have an objective rate or price point that is planned or budgeted for and you accept that there be variations up or down, so long at you maintain that average price point along the way and end with it.

Are there other pricing models you’ve heard of and are unfamiliar with? Or pricing models that you’ve read up on, had explained to you but they remain unclear? Send me an email through the “contact” form and I’ll write a post about it (without mentioning you of course). 

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