However, there is one factor that precedes all others, budget (cost). Without budget there would be no advertising campaign to consider all the other factors. Thus, a lot of scrutiny placed on ensuring the budget is spent efficiently and effectively.
In this post we take a deeper dive in disproving a pervasive myth – A lower ad CPM equates a lower campaign CPA, and thus, maximization of budget. Based on our market leading position in podcast advertising we used our depth and breadth of proprietary performance data to dive into this relative relationship and its implications on campaign planning.
Getting into the details, we approached the analysis with the understanding that there are many factors that could make the results skewed and/or biased in some form or fashion. To make the data as objective, statistically significant and seasonally relevant as possible, we created a sample set with the following attributes:
- Direct-to-consumer clients focused on e-commerce sales
- Live-endorsement ads specifically
- Product average order values under $150
- Clients who spent over a certain total budget threshold over the course of Q4 2018 through Q1 2019
This sample set represents a material amount total podcast advertising bought by Ad Results Media during this time period. So, although the results are directional, we are confident in the story they’re telling us. That is that CPM matters, but not as much as you might think. I.e, The cheaper the CPM doesn’t always equate to a lower CPA (cost-per-acquisition). We’d also like to quickly to point out that we’ve conducted internal studies throughout the last few years and the story has changed very little over time.
Conventional thinking dictates that the cheaper we can purchase ads the higher likelihood of success relative to the campaign’s return on investment. Thus, a lot of media planning decisions are influenced purely based on CPM or other relevant cost metrics. As you can see from the chart, the cheapest CPM is actually less CPA efficient than most of the higher CPMs. In fact, the most efficient CPM cohort is 100%+ higher than the lowest CPM cohort, yet 20%+ more efficient in terms of its relative CPA.
It's an interesting statistic considering we're reaching less people, less frequently. With less exposure, the ad's engagement and conversion rates have to be considerably higher than average for clients to meet their success metrics; and they are. The concept of quality over cost (cost-per-impression) is proven empirically in these situations. That’s not to say there aren't inflection points where you can draw a highly confident conclusion that the CPM is in fact outside the realm of what’s efficient and the campaign would never meet goals if that price was paid. This is especially true when buying produced ads, remnant inventory or media that is not endorsed. In those cases, CPM is definitely one of the, if not the most critical elements to consider.
It's important to approach podcast advertising with a testing mindset. While we know that on average the higher CPM buckets tend to outperform the lower CPM buckets, that isn’t true in all cases as shown in the above graphic ($40+ CPM bucket). This is where the expertise of our Media Team comes into play. We constantly review the performance trends for shows to prune out underperformers, reallocate budget appropriately and create efficient media plans for the future.
Since the relationship between a lower CPM and a lower CPA is less correlated when it comes to live endorsement ads specifically, it’s more important to choose the right shows, host personalities, channels, creative, ad types, etc…relative to what action you’d like the listener to take. If your product is extraordinary, the price point is right, and the media plan is sound, you're campaign will reach your performance goals even if you're paying a higher CPM.