Digital Advertising: Video

CPV, cost per video, represents the cost for each video that a user plays. Depending on the terms of the agreement, it could be based on whether the user plays the entire video or only accesses a few moments of the video. Cost per video is a type of cost per activity, which involves charging a nominal fee to the advertiser by the platform that supports the video. The amount payable to the platform is calculated based on the number of requests for the video from the consumer, multiplied by the agreed cost/activity.

Google’s CPV System

Google’s pay system involves bidding to set the price you are willing to pay for your AdWords video ads. Traditional display ads charge based on the number of times the ad is displayed; a CPV pay system only requires payment if the user actually views your video. The CPV system allows you to gauge how involved your viewers are with the content, so that you can identify when the video is viewed and exactly how much of the video was watched.

CPV Pricing Model

Prior to the use of CPV, advertisers were charged based on cost-per-thousand impressions to measure digital video. However, this was an extremely inaccurate and unreliable method of measuring video activity. CPV was developed to solve this problem. Users choose whether to watch a video ad. Viewer intention to watch an ad is widely seen as a proxy for whether a brand message is being delivered and consumed. Early numbers based on in-stream ads — which let viewers choose whether to watch an ad and only charge an advertiser if a viewer completes the ad — are promising, with 20%-70% choosing to watch an ad.

Benefits and Issues with CPV

Mobile app ads feature videos that allow potential customers to tap play to watch a video featuring the mobile app before installing. Because watching the video greatly increases the likelihood of installing the app, the return on investment (ROI) is likely to be higher, and so this might be an attractive option for app advertisers.

A big concern of the CPV model is what to do about videos that go viral. Most viral videos are watched for their entertainment value, not for any interest in the product. Therefore, very few views of a viral video lead to a sale. However, with this model, the advertiser will pay for every one of those viral video clicks. This can result in very costly campaigns that lead to very low ROI.

CPV also does not measure factors such as effectiveness beyond the intended interaction. In other words, how effective is the video at translating into sales? CPV also doesn’t measure the long-term impact of heavy usage. The reality is that very little is known about how users view online video content and current methods of measuring effectiveness are only a substitution for a true understanding of the ROI.

It currently is not clear what the role of CPV will be in the long run. How you measure human attention and response in relation to the ROI will ultimately decide the fate of CPM versus CPV.

Advertisers are starting to take note of this type of advertising cost, but it isn’t clear if the added expense for actual views will be worthwhile to advertisers in the future. As more and more businesses explore CPV as an option, the techniques for measuring views will surely continue to improve and its usefulness will be better defined.