Why you lose money when paying a Fixed CPM rate?

The most important part to realize is that digital media buying has shifted almost completely from a direct publisher buy to programmatic buying. Unless you’re talking to a publisher, it’s almost certain that your digital media buying vendor is purchasing inventory Programmatically (or Facebook or Google Adwords – the principle stays the same). Having a no Fixed CPM pricing encourages transparency and allows us to optimize for your specific goals.

Once an ad vendor has purchased inventory, they can resell it to advertisers in a variety of ways. Many media buying vendors will charge you on a flat CPM/CPC rate. This typically leads to them pocketing 30% – 70% of your media budget. How? Let’s start by presenting the chart below. Before your eyes glaze over, here are the key things you need to take a look at:

  1. Grey – Actual media cost on the platforms you leverage (Facebook, Google, Programmatic etc). Since these platforms allow you to bid for impressions or clicks, the cost of each impression/click is different
  2. Blue – Since your vendor is charging on a flat CPM basis, they get the same revenue for every impression (the flat line at the top). The blue area represents their margin

“So what’s the orange bit?”, you might be asking. That’s the cost that a transparent vendor will charge you. As you see from the illustration, this helps an advertiser save a significant portion of the money that would otherwise have gone towards padding a non-transparent vendor’s margins. And this is where transparency of the sort that Datawrkz offers makes a difference. We have repeatedly seen that our clients save 20% – 50% when they work with us thanks to our transparent pricing model.

With transparent pricing, there is a complete alignment of goals between vendor and client. We can focus on customer goals and adjust campaign delivery based on marketing objectivesMaximizing our margin is never a goal since our commission is known upfront. The only way Datawrkz’s margin can increase through this transparent pricing model is when the budget increases. Needless to say, the only way the budget would increase is when we hit the campaign’s goals. This creates a virtuous cycle that results in both better campaign performance and stretching your marketing dollar much further.

Leave a comment

Data-Driven Digital Agency and Independent Trading Desk