Re: CPM Pricing Models

From: Brad Jensen <brad_at_elstore.com>
Date: Mon 21 Jan 2002 09:42:48 -0500

"Janet Attard" <attard_at_businessknowhow.com>, quoting
"Daniel Limbach" <dan_at_attritiongame.com> wrote:

> > CPA offers guaranteed
> > results, while CPM carries the risk that nobody will click
> > through and your investment vanishes into the ether.
> >
> > The only way CPM can beat CPA is if you have a perfect ad,
> > which results in an unusual clickthrough rate.
>
> So why should publishers bear the responsibility for ads
> that don't work?

So that they can cut the risk for the advertiser and get their
business. In other words, to compete with other publishers in a
buyers market.

> > The best way to profit from Internet marketing is to have
> > a high margin product at a relatively high price. You need
> > fewer sales before you recoup your advertising investment.
>
> No, the best way to profit is the way mail order (yes, the
> web is mail order) - and most businesses in general have
> always profited: get the customer, then sell more products
> to the customer. With most CPA models, the advertiser gets
> the customer name, the publisher has nothing but a low-
> percentage cut on a single sale- if they get that.

What is happening here is that market forces are working, and
publishers do not like the results.

To turn the question around, why should the advertiser take the
risk that your site will produce a profit for him? Please don't
tell me because that's what they do in magazines. That's not a
reason, that's a whine. Unless you are telling the advertiser to
go back to magazines.

> > Here's where it gets sticky. If a website draws quality,
> > targeted people who buy things on the Internet, as many
> > sites claim, why don't these websites just join affiliate
> > programs and promote them?
>
> Why don't magazines and newspapers publish nothing but
> coupons and only accept payment for the ad when a coupon
> is turned in at the time of sale?

Actually some print media have accepted per-inquiry advertising,
but it is a pain for them to do. I would not be surprised to see
them start doing it again with a web tie-in soon.

The reason they don't now, is because they haven't needed to, to
stay in business. The percentage of magazine readers who will fill
in and mail a coupon is tiny.

What would be cute on the web side, is if ad networks would keep
track of all the impressions of Brillo Soap Pads to a visitor to
many siotes, then when he or she finally clicks, aportion the
click value back to all the impressions with some formula. That
would encourage publishers to be a part of the network. You would
have to give probably half the value to the final click site, for
human nature reasons - everyone thinks their own site is better,
and everyone is greedy. (I mean that in a good way.)

> > A website makes more money selling ads
> > that don't deliver a good ROI than promoting affiliate
> > programs that don't generate significant cash flow.

> A content web site that keeps people coming back isn't in
> the business of selling products any more than any magazine,
> radio station, TV station or other media is in the business
> of selling products.

Sure they are. If they don't sell products, they go off the air.
They target their audience based on demographics, they measure and
trumpet the results.

> If advertisers are unwilling to pay reasonable rates for
> placement on content sites, the web will soon be nothing
> more than a cross between a direct mail catalog and the
> yellow pages.

It is always expensive and ultimately futile to resist market
forces. For example the antiglobalization people are basicly
saying that they want consumers in this country to pay a hidden
tax to support the higher wages and industry expenses of a select
group, and they want to slow the development of foreign nations as
an added expense.

People are starting to charge for some part of what they have
given away for free.

Brad Jensen
www.eufrates.com





Received on Mon Jan 21 2002 - 08:42:48 CST