IAB Certification vs. CPM Rates vs. Direct Response

As many of you know, I’ve been a podcaster for almost 14 years, quite close to “one of the first.” I’m also the CEO and co-founder of BackBeat Media, a company that represents publishers and manages their sponsorships so they can focus on publishing their content. We’re in our 20th year of that business, meaning that we’ve been buying and selling digital advertising and representing publishers since before podcasting was even a word.

Metrics have always played a role in our world, of course, and that’s true with podcasting, too. Podcast metrics are still evolving, though, as sponsors are understandably looking to have a consistent method to compare shows. In the beginning – and still today for most – shows each came up with their own ways of calculating what “one download” means, and that makes it tough for advertisers to shop around.

The quick solution for this problem was to default to what’s known as Direct Response (DR) advertising – listeners and podcasters know this as custom coupon codes and show-specific URLs to visit. By employing these and other DR methods, advertisers are able to compare results from show-to-show, giving them something consistent against which to match and make decisions.

Direct Response effectively ignores any branding value provided by having their companies or products mentioned in the shows, but it at least gives those people spending money something to point at and say, “I can trust this. It’s real.”

Over a decade ago many of us early podcasters tried to solve this problem by creating the Association for Downloadable Media (ADM). Our primary goal: come up with a download-counting methodology upon which we would all agree and adhere to. That organization faded away, but the work we did carried on, and is now at the foundation of the Internet Advertising Bureau’s (IAB) Podcast Measurement Guidelines. These, like the ones we created with ADM years ago, are voluntarily followed by many folks in the industry, and the IAB is also offering a (paid) certification service to lend even more credence to those folks who are using them.

Really, this can all be distilled down into one word: trust. Sponsors want a way to trust that the money they’re spending on their podcast ads is valid. Agencies want a way to show their clients that the rates they’re paying are fair.

All of this sounds great and easy, right? And it is… if you’re starting a podcast tomorrow and start hosting with a company that’s adhering to these new standards that seem to be taking hold (though there are no guarantees). Where this is all being seen as a problem is if you have an established show and your download numbers are not being calculated via these IAB-approved methods. Changing to these methods will almost certainly cut your reported numbers down in this scenario, often by 20-50%. That’s a lot.

The bigger concern is that this will affect the value of an established show not just going forward, but also retroactively. There are all sorts of discussions happening about make-goods and refunds and all sorts of things.

This last bit is silliness, and I’ll explain why: Nearly all of those existing ad buys are Direct Response ads. Yes, they were likely originally purchased based upon CPM – the Cost Per one thousand (M) downloads – but all renewals are based upon overall value. And this means that if someone bought a Direct Response ad on your show for $1,000 and renewed it (or are happy with performance and haven’t canceled), they saw value at that price. And this, if you follow my logic, therefore defines the price for your show.

Your download numbers don’t have anything to do with it at this point in the process. It’s all about how your show performs, and whether that performance can be replicated. If it can, the sponsor continues to pay for that performance.

For established shows with established advertising relationships, you and your sponsor have agreed upon the price of your show as it currently exists. If and when you change the formula you use to calculate your downloads, nothing else changes: your show is still the same, the same number of people are listening, and the same number of people are reacting and engaging with your sponsors. And this means that the price doesn’t change, either.

Let’s do some math for Sponsor A who buys an ad on your show for $1,000.

Let’s say that ad was purchased when your show counted its downloads at 40,000 per episode. To get the CPM (cost per thousand downloads) we divide $1,000 by 40 and get a $25 CPM. Great. Sponsor A is happy, Sponsor A sees results from this ad, and Sponsor A continues to advertise on your show. $1,000 is the right price for them on that show with that show’s current audience.

Now let’s say you (or your host) decide to change the formula by which you calculate downloads to be IAB-compliant, and with that new formula your show gets 28,000 downloads. We already know the price is $1,000, so in addition to re-calculating your downloads, we re-calculate the CPM, which is $36. Congratulations, your effective CPM just went up because your well-established show has already proven its value.

Obviously it’s not going to be this simple. There will be some shows that need to be re-priced. But it’s also not going to be as simple as, “oh, crap, my download numbers went down from 40K to 28K, so now I must recalculate my price at the previously-decided CPM and give refunds to anyone and everyone who ever bought an ad from me.” That old CPM was based upon a lot of things, and one of those was your old method of calculating downloads, a method that likely worked well for you for a decade or more.

TL;DR: Don’t panic, my podcaster friends. If you change one formula, you need to change them all, and your sponsors and their agencies already understand this and are likely here to help.

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