Re: Generating income via ads

From: Jim Chandler <jimc_at_price.com>
Date: Wed 10 Jan 2001 10:33:04 -0500

MICHAEL MARTINEZ <Michael_at_xenite.org> WROTE:
> Maybe this is a good time to open a dialogue on this
> list for establishing some guidelines. How about
> the following table. What do people here think?
>
> In terms of page views per month:
>
> 100,000 $5 CPM
> 250,000 $10 CPM
> 500,000 $15 CPM
> 750,000 $20 CPM
> 1,000,000 $30 CPM
> 2,000,000 $50 CPM
> 3,000,000 $75 CPM<
 
TO WHICH MATT MICKIEWICZ <matt_at_sitepoint.com> REPLIED:
> Why would the CPM rates increase as the number of page
> views a site receives increases? Does the fact that
> you're buying 10,000 ad views out of 100,000 vs. 10,000
> ad views out of 3,000,000 justify a $50 vs. $750
> expenditure? In either case you're getting the same
> exposure.
 
MICHAEL MARTINEZ <Michael_at_xenite.org> WROTE:
> The chart above is based on some examples I've found on
> the Web and my own feeling on what a tolerable limit
> should be. But my "feeling" is hardly an educated
> one. The progression implies a value in increasing
> traffic but a ceiling on what is affordable.

MATT MICKIEWICZ <matt_at_sitepoint.com> WROTE:
> If you happen to be buying 100% of a sites inventory,
> if anything, the CPM rate should decrease as the size
> of your buy increases.

MICHAEL MARTINEZ <Michael_at_xenite.org> WROTE:
> That would seem reasonable, but I doubt I would be able
> to figure negotiation into the chart. At least, I'm
> still learning about this as I go along. I was hoping
> for dialogue, as I know a lot of people do ask for
> this kind of information.

RESPONSE:

Any part of the internet that is not selling something
directly needs to now understand that the internet is a
medium, like magazines, outdoor, newspapers, TV, or
radio. As the internet grows beyond its infancy,
advertisers will treat the internet like any other
means they currently use to reach their potential
customers. They will use standard media-buying
mechanisms for buying space on the internet.

Media buying is a concept well understood by both
advertisers and advertising agencies. In media buying,
the equation is

      Reach X Frequency = Impressions

In internet terms, reach would be defined as the total
number of unique visitors. Frequency would be how many
times those uniques see an ad. Multiply those and you
get the total views, or impressions.

In television, the reason that prime time is more
expensive than daytime is greater "reach." Advertisers
pay for reach, because it is harder to achieve.

You can get the same number of impressions in daytime -
the same number of eyeballs - but the viewers are fewer
(fewer "uniques") and have higher repetition.

With web sites, the larger the traffic, the greater the
"reach" (as opposed to "frequency"). For now there is a
rush to reach, because the advertisers don't yet have
the information about or the understanding of the place
of the internet in their communications decision. That
is why the top 100 sites have 85% of total ad spending
(or some such - we have heard different numbers). When
there is a lack of knowledge, the instinctive reaction
is to go for reach in part because it is easier to
create and understand.

However, if your site is targeted, and you have an
effective visitor group with a history of financial
actions coming off your site, loyalty and "frequency"
can be effective messages. In fact, this is one of the
strongest messages for all of the internet, because the
internet is the large-scale aggregation of discrete,
smaller audiences with particular wants and needs. As
media buying for this "medium" called the internet
becomes more sophisticated, these smaller,
higher-loyalty audiences will be increasingly valuable.

Buying 100% of the inventory of a site, however,
produces "banner burnout" and reduced attention.
Intuitively internet people know this, and they have
seen it in their click-through and response numbers.
This again validates an old media buying concept. A
bell curve exists for media effectiveness. To a certain
point, more frequency is good; after that point,
additional frequency does not produce additional buying
motivation. Exactly when you reach maximum effective
frequency is a soft concept, and why media buyers get
paid the big bucks. But in general it has to do with
such concepts as importance of brand to a purchase,
dollar value of a purchase, purchase frequency (you buy
toothpaste more often than you buy cars - even if you
are Bill Gates), immediacy of a purchase, and
competitive pressure.

COO
Price.com, Inc.





Received on Wed Jan 10 2001 - 09:33:04 CST