In an insightful Online Media Daily blog post today, Zephrin Lasker, CEO of Pontiflex, makes a case for a progression from traditional online CPM-based pricing toward a CPL (Cost per Lead) or CPA (Cost per Action) pricing model. Granted, Lasker’s company has placed its own bets on lead generation and the CPL model, but his points are worth noting and have some applicability to DOOH.

Lasker notes, “According to the IAB, revenue from CPMs was down 6% last year. This reflects not only a tough economy, but a growing awareness that paying for impressions does not provide the insights or the ROI that marketers are looking for.” His point that paying by impressions may be losing favor is well taken. However, I am not sure I am buying the point based on lack of ROI, as market pricing tends to reflect at least a perceived balance between cost and return. On the other hand, the notion that advertisers are not getting the insight they want from CPM models has more intuitive traction. Buying based upon impressions requires a certain leap of faith that collecting eyeballs builds brand, and that brand building eventually results in measurable revenue. The problem has traditionally been tying that revenue to specific campaigns. Lasker notes that CPC (Cost per Click) has been a very effective tool for bringing performance into the discussion. He accurately classifies CPC as a direct response methodology, and if you think about it, a simple click-through signals some intent, and certainly an opportunity to convert, but it also remains anonymous until and unless the clicker volunteers their identity. Yes, a response has been counted and billed, but the marketer likely doesn’t know much (or anything) about the people who did not convert.

Lasker explains the nuance of CPA and CPL this way: “CPA is based on transactions — credit card applications, loan inquiries, etc. It represents low volume and is better suited for ecommerce than branding. CPL, on the other hand, is about acquiring contact information from consumers for re-marketing purposes.” In both cases, the customer is providing the marketer with personal identification, and either explicit requests for action or opt-in permission for further contact from the brand. This goes beyond the positive response of CPC because the marketer now knows who is interested, can measure conversions and also gain important insights from non-conversions. It isn’t hard to see the imperative for many online advertisers to want more than eyeballs.

Does this have any bearing on DOOH advertising? How will DOOH advertisers get more insight from their out-of-home buys? In a pure digital signage scenario, which is a one-to-many vehicle, there is generally no keyboard or a way for a viewer to “click through”, input personal information or otherwise indicate immediate interest. That being said, there are at least three methods that quickly come to mind that advertisers and network owners can collaborate on in order to bring performance and insight into the equation. In decreasing order of technological complexity, they are:

1. Mobile marketing: A call to action within a video advertisement that leverages the cell phone that the vast majority of viewers carry is likely to continue to gain favor. Whether that involves a CPL type of opt-in via a short code campaign (“text BrandX to 12345 for more information”), or even that rarity in today’s text- and email-centric world: a phone call, the ability to capture interest and information from a mobile device should prove to be very valuable. The advent of 2D (QR) barcodes, readable by cell phone cameras with the right software on board, would offer another way to opt in. In order for network owners to gain revenue from mobile marketing, they will have to partner with mobile marketing providers who control the campaigns.

2. Web marketing: An increasing number of digital signage networks will invest in ancillary web sites that will provide another vehicle for exposure of the network and its advertisers. If viewers are intrigued by a piece of content or an advertisement they saw, they will have a way to access that information at home with a keyboard in front of them. Network web sites would provide extra value to advertisers, where products and services can be explained more fully, and both CPA and CPL opportunities will exist. This would potentially add a performance-based kicker to the pricing model.

3. Collateral marketing: Yes, good old fashioned collateral has its place in many environments. Presenting a coupon or mini-brochure to a customer who has had their interest piqued by a video ad makes sense, and can also be very measurable. Network owners can facilitate this by adding the collateral “slots” to their display fixture and charging for fulfillment and participation. Uptake can be measured by the number of pieces moved per site in a given period, and conversion and ROI can be measured by redemption or other actions that are easily tracked and attributed to the collateral. Having a coupon available in the same environment where both the ad message was conveyed and the product is available is a huge advantage over online offers.

These methods for adding some sense of performance measurement and ROI to DOOH advertising campaigns are not likely to supplant CPM-based pricing in the near term. Instead, they will augment it where appropriate, and provide tangible measures for the effectiveness of the digital signage campaign. As is the case with all markets, the pricing model will adjust over time in a manner that will make a dollar invested in a multi-touchpoint digital signage campaign equally or more effective than a dollar invested elsewhere. Mr. Lasker’s identification of an important online trend will take some time to be adapted to the out-of-home market. While we can learn from the travails of online marketers, we are likely to continue counting impressions even as we strive to engage and learn more about the people behind the eyeballs.