NONE: Re: ONLINE-ADS>> Direct response pricing
Re: ONLINE-ADS>> Direct response pricing
Scott Cherkin (scott_at_webgenesis.com)
Fri, 15 Aug 1997 11:09:50 -0500
Gloria,
Cost-per-click or per-sale is a very popular trend and you will hear people
ask for it more and more. There are many problems with this model and it
really depends on you site whether it makes sense for you.
Cost-per-whatever greatly undervalues your content. It shows that
advertisers aren't valuing your media. Do you? Is there inherent value in
being on your site as opposed to another site? This is what you need to
sell. It will be very hard to sell on a CPM if you start selling on a
cost-per-click. The reason that many advertisers are asking for
cost-per-click is because the web is measurable and set-up to be results
oriented. The reason web publishers accept it is they have a lot of excess
inventory and they need some income from whereever they can find it.
In the end you will have to decide what makes sense for you but I think
cost-per-click greatly complicates this already challenging market. Here
is the thought process you have to go through to figure out if
cost-per-click makes sense:
-how much is the advertiser looking to spend? Usually they will tell you
if their want to work this way.
-how much do they want to pay per click? Anywhere from $2 to 50 cents
seems to be the average requested click.
-ask the advertiser what their click-through rate is. Take that number and
subtract a few % pts - figure they are over-estimating :) I would estimate
a 1% click rate to be safe.
-Lets say the advertiser wants to spend $500 for 500 clicks. A 1% click
rate means that you have to serve 50,000 impressions to get 500 clicks.
Now you have to determine if you have the inventory. And more important -
is it worth it to you to serve 50,000 impressions for $500? Or if they
want fifty cents per click, is it worth $250 to you? Further, who knows if
they will even get a 1% click rate? You don't want to be serving these
banners forever trying to get the contracted number of clicks. You have to
determine what a reasonable cost per click is based on this sort of
calculation. Working this way can be a huge inventory eater and may not be
worth your time.
I much prefer the CPM model and working with the advertiser to achieve
their goals. If they have a target response rate, try to work with them
but not completely at the expense of the media. Offering value adds also
helps to justify the CPM model - (i.e. sponsorship of weekly newsletters.)
As a side note, I would like to mention a piece of big news we had here at
The Globe by WebGenesis. We received a $20 Million private investment from
Michael Egan, former owner of Alamo Ren-A-Car! It is a very exciting time
here. Check out the release at :
http://biz.yahoo.com/prnews/97/08/14/y0007_4.html
-Scott
__________________________________________________________________________
Scott Cherkin Phone: 212-367-8823
The Globe by WebGenesis, Inc. Fax: 212-367-8603
31 West 21st Street email: scott_at_webgenesis.com
4th Floor web: http://www.theglobe.com
New York, NY 10010
Come check out the globe. <http://www.theglobe.com>
__________________________________________________________________________
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