Should Online CPM Models Be Unique?

From: Kevin Frazier <kfrazier_at_adace.com>
Date: Tue 23 Oct 2001 10:53:20 -0500

<Ivan Weltman Wrote><snip>
Where I do agree is the absurdity of a CPM measure
based on impressions. It should be based on unique
individuals with an opportunity to see the
advertisement in a fixed period of time, say 24 hours.
<end snip>

Rob and Ivan brought up a good point regarding the
value and meaning of CPM as it pertains to online
advertising. I agree that print CPM offers more
value than current online impression based CPM
schemes for two reasons. Ivan pointed out that print
may have an average of 3 readers per copy, but two
other critical benefits to print advertising is
"time" and "recall".

When reading a magazine the reader can spend more
time with an ad, and more importantly, they can
revisit that ad regularly, at any time. They
control when they want to see the impression by
picking up the book and reading it. They can reference
back to it at any time.

Web based ad impressions are only there at that moment.
They cannot be recalled easily, unless the user downloads
the ad banner to their hard drive, or the advertiser buys
all or most of the inventory on a given site.

Currently online advertisers are buying up as much
inventory as possible and trying to buy it all under the
terms of a cost per sale or cost per lead basis. I think
we all agree this is not working, and not fair! We
may all start to benefit more if we can move online
advertising closer to the print and television model.

Food for thought: Maybe we should be selling space once.
Instead of rotating ads for every impression, maybe an ad
slot should be sold on a monthly basis as it is for print
and TV. Advertisers can get better rates for buying
frequency and pages. We sell ads based on the "unique"
page count and float a hybrid pricing scheme basd on
click-throughs. Example: an advertisers buys the homepage
and 5 top level link pages on your site for two months.
They own that space for a two month period (only their ad
will show in a given slot). Keep in mind a page can still
contain multiple ad slots.

You set a base CPM price for the "unique" impressions
delivered during that time. At the end of month 1, you
calculate how many unique impressions (say 1 million
uniques) were delivered, and submit a bill for 1 million
impressions for month 1. You can also attach a CPC fee if
your site delivers better than a 1% click-through during
that month. Maybe you get an extra 10 to 20 cents per click
for all clicks over 1% on top of the base CPM fee (could do
hybrid CPA over and above the impression payment, but hard
to track). With this model sites can collect say a 50%
deposit from advertisers to hold the time and page slot
based on past performance. This gives the site operating
cash upfront, and is safe for the advertiser, as they are
guaranteed specific pages with a proven track record.

Sites with huge traffic can charge more money for fewer
"pages" of inventory, and maybe even sell on a weekly basis
if their unique numbers are really high. By selling pages
over time, we benefit in a number of ways, and I'm sure I'm
missing other subtle benefits.

1) Better margins and easier sell through Flat pricing
based on unique visitors plus recurring upside for
performance creates an easier system to manage and an
easier system to sell. Publishers can focus their
efforts on a targeted group of advertisers that fit their
demographic, and sell to them over time.

2) Recall - If users can revisit a site and know they
will see the same ad on a specific page for a week or a
month (maybe we show an end date under the ad using the
alt text) they may be more prone to revisit a site to
recall the ad just as they do with print.

3) Lower ad serving fees - If an ad is the same on
specific pages over time, then fewer ads need to be
rotated. Sure you may still have to rotate a variety of
ads for a single advertiser, but that too can be charged
at a premium. Rotation costs money. It also enables sites
to cache images so frequent visitors don't have to keep
getting page refreshes. Since you are only charging on a
unique user basis, then cached images are OK.

4) Advertiser archival - By selling ads over time on
specific pages we can also archive advertisers for future
retrieval. Example: A user wants to see advertisers for
the month of June and presto you display a list of all
June advertisers (with links). If you really wanted to get
fancy you could list the pages they advertised on. This
has more upside for the advertiser and can be offered as a
value added service (more $$ for the publishers).

I am not suggesting this is the end all solution for online
advertising.

I am just trying to help us all think of new pricing models
and new delivery techniques to create better standards and
solid profit margins.

I am hoping my ideas will get everyone thinking of new
possibilities. I am open for better ways than what I suggest
and ask that you share your ideas with the list. Best of
luck to us all!

Kevin Frazier
CEO
AdAce, Inc.
http://www.adace.com
kfrazier_at_adace.com




Received on Tue Oct 23 2001 - 10:53:20 CDT