Quora’s Bidding Options: CPV, CPC, and CPM
Every once in a while, I receive an email from Quora with interesting questions that intrigue me to learn the responses to, such as ‘What is the saddest thing you’ve seen on a resume?’ and ‘What is the biggest culture shock you have ever faced?’ In addition to such interesting questions, I sometimes also visit Quora to solidify my understanding of the material that I learned in classes.
That said, whenever I visit Quora, on the right I see random advertisements that somehow seem to have targeted me. One time, when I went onto Quora after searching for hotels to stay during Thanksgiving break, I saw a poster type advertisement from Hotels.com to find the lowest prices in any area. When I refresh the page, it shows me another targeted advertisement, and that got me fascinated about how advertisements are shown and how the slots are monetized.
Recently, I came across this article that Quora is now launching video advertisements that can range from 6 to 30 seconds. The article mentioned that the format will be horizontal with a banner to boost the clickthrough rate. One interesting point that stood out to me in this article is that they are adopting CPC (Cost-per-click) and CPV (Cost-per-view) bidding options.
During class, we covered CPC (Cost-per-click) with each advertiser having their revenue per click, which is the amount of profit it receives each time a user clicks on the ad. However, as a system that charges based on the number of views or interactions an ad receives, I believe a CPV (Cost-per-view) bidding option might be better for video advertisements. I would assume, however, that it would be hard to create a CPV model as you need to predetermine the likelihood of the user completely watching the advertisement. This got me interested in learning about different types of bidding options, as I previously thought CPC was the only method in which you could run a sponsored search market.
Upon research, I was able to learn about mainly three types of bidding—the traditional CPC (Cost-per-click), CPV (Cost-per-view) that are most suitable for video ads, and CPM (Cost-per-mile). I also learned that the bidding strategy depends on the purpose of the advertisement. We should use a CPM if we want our users to see the ad without a direct call to action, such as visiting their website or applying to a position, such as a movie or branding ads. I would assume that this model is the easiest bidding type since the bid with the highest price will mostly win for each slot and those ads will be shown with the challenge to determine how much the impression will cost and how much the advertisers are willing to place the bid given their budget. A CPC bidding model’s challenge would be to account for how likely the users will click on the advertisement and how much to pay based on the likelihood of the click-through rate. That said, these are very closely tied to the lessons we learned on matching markets, the difference in bidding models doesn’t change the fact that the advertisements and their slots all work in matching markets.
With each of the model’s advantages and challenges, it all comes down to the purpose and the end-goal of the advertisement to fit the artificial intelligence of the advertising platform. Moving forward, I would like to learn more about the artificial intelligence behind the advertising platform!