Outcome-Based Media Buying: Why Advertisers Are Revisiting Pay-for-Performance Models

Aditya Jangid, Chairman and Managing Director, AdCounty Media

Media buying has traditionally revolved around delivery metrics, including impressions, clicks, CPMs, and viewability. These enable advertisers to measure the efficiency of their media buys, but not in assessing how effective those buys were at moving the business.

The lack of direct correlation between the two is the driving force behind the resurgence of outcome-based media buying.

Advertisers are now using pay-for-performance as much for its strategic business value (aligning media investment with business accountability), as they did for its initial purpose of tactical pricing experimentation.

Pressure has increased from multiple sources to cause a change in how campaigns are assessed. Budgets are being scrutinized more closely, so leaders want clear lines between spend and growth and marketers are being asked to measure both campaign results and an overall commercial return. In this environment, paying only for impressions can seem insufficient.

Outcome based models facilitate this new conversation by requiring everyone to begin with the end goal of their campaign(s). Rather than only measuring against what was delivered for the campaign, marketers will measure success against existing business metrics such as sales, qualified leads, completed subscriptions, etc.

This creates better alignment between the media strategies and overall business objectives.

However, the main reason advertisers are re-evaluating these models now is that the advertising ecosystem is finally developed enough to support them on a larger scale. Advanced attribution systems, more effective first-party data analysis, enhanced event tracking capabilities and improved optimization models have made it much easier for advertisers to link media inputs to business outcomes.

A few years back, many companies were still heavily reliant on using proxy signals as a gauge for success. This often meant that successful brands would use high click-through rates as a way to measure their success because it typically was very difficult to measure what happens after that and make the connection. Now this gap is closing rapidly due to advertisers being able to optimize much deeper into the marketing funnel. Thus, performance-based buying has become much more viable than it was previously.

Beyond the convenience of having a consistent metric for both advertising and partner performance, using a pay-for-performance model builds a better relationship between the advertising partner and the media buyer. Everyone involved in a pay-for-performance model is now working towards the same goal together, rather than fighting over whether or not measuring success solely by delivery metrics. The nature of having common goals helps improve decision making for everyone involved, helps clarify what the optimization strategies should be, and allows for more open and honest discussions about what isn’t working and why.

However, this model is not one-size-fits-all. You shouldn’t define every campaign as a direct response, and not every business outcome can be measured via short term attribution windows. Therefore, building brand equity can require a different measuring stick. That being said, for campaigns driven primarily by performance, new customer acquisition programs, or other forms of measurable growth, there are few reasons to ignore the fact that using a pay for performance model can provide significant value for both the buyer and the seller.

This is fundamentally about a mindset change: advertisers are changing the way they purchase media from buying it as an inventory to purchasing based on accountable growth.

This is why pay-for-performance has become relevant again.

This is not simply the result of an old way of doing business; this is due to having a much more measurable ecosystem, smarter optimization, and a stronger demand for accountability. To many people, outcome-based buying is not necessarily changing how the media themselves are priced, but rather changing what advertisers believe the media itself should ultimately be held accountable for in the first place.