Are 68% of CMOs Dumber than CFOs?Of course not. But January, 2013…well, the answer may be different.
Three components shape the answer: increasing ROI pressure on chief marketing officers; viewable impressions; and the chief financial officers bailiwick of Generally Accepted Accounting Principles (GAAP).
1. ROI of ad dollars—increasing pressure from CFO to CMO.
At a high level, CMOs are shifting dollars out of traditional into digital–a reverse of past trends according to the Feb 2012 Duke University’s CMO Survey. ROI is the reason, but ROI of the online display market is about to change (for the record, I’m a huge fan of display when measured and attributed properly). For years, the definition of an impression from the industry was simply a “server request.”
A sever request simply means when a consumer logs on to any website, that website says to an ad server, “Hey, there’s a consumer here–send me a display ad really fast!” Nine times out of 10, the ad makes its way to the page that consumer’s on. But 12% of the time, the display ad never fully loads. This happens for a number of reasons, but right now advertisers still pay for ads never reaching a consumer’s page.
Smart CMOs would be asking their agencies to request the fully loaded impression data and pay their ad bill from that versus server requests: saving 12% of their display budget.
But don’t send the email just yet. There’s more.
2. Viewable impressions, the impending standard from the IAB, ANA, and 4A’s
The Interactive Advertising Bureau (IAB), Association of National Advertisers (ANA), and American Association of Advertising Agencies (4A’s) are taking this even further, and CMOs and CFOs alike will be happy.
What’s it all about? Besides the above-referenced 12% gap from server requests to fully loaded impressions, there’s an even bigger gap. The size of the Grand Canyon.
68% of all served display ads never get seen by consumers. Yes, on average, 68% of all display ads aren’t even viewable according to the C3 Labs report. Viewable means a fully loaded display ad, viewable in the screen of the consumer for at least one second (which is the IAB recommended standard).
Certain advertisers may see different numbers based on whether they’re buying premium or guaranteed inventory. But bottom line, today all advertisers pay for display ads that aren’t even viewable.
Both CMOs and CFOs are discovering this, and hats off to the IAB, ANA, and 4A’s for having the foresight to create the new definition of what a display impression is: one that’s fully loaded, and in view for at least one second.
In 2013, several things will happen. Advertisers are not likely to pay for an unviewed impression. View-through cookies will not get credit when measuring online performance (done when accurately measuring online performance with an attribution modelling system). Cost per impression (CPMs) for viewable impressions will justifiably rise 50-70%. And finally, with viewable impressions, all advertisers will experience a greater ROI, and even more ad dollars will pour into digital as a result.
3. The CFOs bailiwick: legal compliance with GAAP, specifically IASB 38: 68 pertaining to advertising expense.
CMOs aren’t likely familiar with the IASB (International Accounting Standards Board). But they do know CFOs don’t have much leeway when it comes to Generally Accepted Accounting Principles (GAAP), which falls under the IASB, and if a CMO violates GAAP, there’s a whole ‘lotta auditing happening.
It’s actually pretty simple, though. Paragraph 68 of the IASB 38 deals with recognition of expense. It says, “Expenditure on an intangible item shall be recognised as an expense when it is incurred.”
On the surface it makes all the sense in the world, and it’s what CMOs do today. Now the quandary is: can you/should you book an expense if you know impressions weren’t viewable? In comparison, if TV ads were never delivered, a CMO shouldn’t pay for them. That’s why Nielsen, in part, exists: to check whether those ads actually ran.
For a CMO to not check and see if ads ran is fiscally irresponsible if technologies exist to do so. And, if the CMO didn’t employ generally accepted methods, similar to Nielsen in the online world, and paid for ads which didn’t run–the company would be in violation of IASB 38:68. Expenses not aligning with services or advertising.
So now you ask: are you ready? January 2013, the new industry standard will likely be in place. If you wait until January and you don’t act on industry standard, will you be in violation of GAAP? CFOs generally don’t like to be caught by surprise, and they don’t like violating GAAP.
The smart CMOs…they will be ready. Now you can send that email.
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