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As upfronts evolve, what’s the true value of a CPM?

Illustration by Dave Cole / Getty / The Current

How should we think about CPMs in the era of streaming television?

At last week’s Forward ’23 event in New York, The Trade Desk CEO and Founder Jeff Green outlined his vision for the future of ad buying and selling by invoking the concept of the forward market, a term often used in the financial industry to describe entering contracts that will be settled at a later date — typically used in trading currencies and commodities.

“In digital, we have a unique opportunity,” Green explained. “We have to basically turn, call it, $10 CPMs into $40 CPMs. And sometimes that’s $15 CPMs into $50 CPMs or whatever. And the only way that you do that is by making them way more relevant and way more effective.”

Therein lies the challenge for marketers, as many rethink their approach to the traditional upfront buying season and consider a “forward market that’s always on.” To hear Green tell it, the forward market represents both a technological shift and a philosophical one: It allows an advertiser to strike a deal with a content owner ahead of time (like an upfront deal), but then marries that with real-time data-driven advertising. For this shift to be fully effective, said Green, the industry must refine the process of forecasting and segmenting audience blocks, which would allow advertisers to reach the audience they’re after.

“What it’s going to take is a more open internet, meaning data [is] to be more properly shared so that a marketer and a publisher can benefit, personalize the ads better, not just from a reach and frequency standpoint but also a creative sequencing standpoint,” Matt Prohaska, the CEO and founder of Prohaska Consulting, tells The Current. “And then we can definitely justify CPMs or at least eCPMS of $50 and north.”

The question of price isn’t as important as whether the ad is driving top-line revenue, according to Vinny Rinaldi, the head of media and analytics at Hershey, who was speaking at the Forward ’23 event in New York. “When you look at it that way, no matter the cost, if you’re getting more people to buy your product, it shouldn’t cost you less,” he said. “Effectiveness is defined as revenue due to media.”

According to Rinaldi, a new value exchange is taking place that means that traditional KPIs for ads based on measuring impressions are not as valuable as more targeted ad campaigns that can allow Hershey, for instance, to “control reach and frequency,” and thus find the right audience. “The price isn’t the reality at the end of the day because you are paying for that person in real time,” he said.

Foundational to this notion of finding that person — whether in New York City or Topeka, Kansas — is the need for a common currency of identity, such as Unified ID 2.0 (UID2), which allows advertisers and publishers to match their own data sets across platforms, typically via privacy-centric clean rooms. Publishers and advertisers that have supported new identity solutions early are already seeing positive business results. Disney reported that it has seen more than 80 percent match rates since it implemented UID2, according to Lisa Valentino, EVP of client solutions and addressable enablement at Disney Advertising.

For advertisers, strategic use of their first-party data sets is key to optimizing their campaigns on the sought-after inventory available on streaming platforms, said Green. “Advertisers want to put more and more of their data to work to justify the premium that is likely to come with only four minutes of ads per hour, as well as a light ad load that has to be highly relevant,” he said. “You have to have 80 percent match rates in order for that math to work.”

For now, there’s still work to be done to evolve this digital marketplace into the forward market that Green proposes. Not all ad buyers are aligned on the value proposition of connected TV (CTV).

“They are getting closer, but you still see an over-reliance on linear TV from more established clients and agencies,” says Amir Bakhshaie, senior VP of advertising and IntentKey Products at Inuvo. At the same time, he tells The Current, most publishers are on board with the idea that they can sell the same ad for more if it’s data-driven. “Buying CTV ad impressions will evolve. It will be a process as both agencies and clients continue to scale CTV adoption,” he adds.

And about those CPMs: Prohaska, for one, is bullish on their upward trajectory. “As CTV becomes more sophisticated, leveraging both identity as well as reach and measurement, and everybody finds appropriate third parties to keep score of those various metrics, then CPMs should go north because waste should go down,” he says.