NONE: Re: ONLINE-ADS>> Banner Ad Networks
Re: ONLINE-ADS>> Banner Ad Networks
Ray Taylor (taylor_at_bizbiz.com)
Thu, 20 Feb 1997 10:44:40 +0000
> > The other question I have is regarding the compensation. They take 70% of
> > the first $5,000 and 55% of anything over that. I understand that they have
> > to make money as well but that sure doesn't leave much for the web
> > publishers. Is this standard practice elsewhere in the world?
>
> >From what I've seen and read, big commision bites by the ad networks do
> seem to be what's going on (amount varies, but everyone I've seen is higher
> than offline agency rates.)
>
> My question is, why are publishers accepting these rates? If people said
> "no, too high", they'd have to lower them. Or why not sell your own ad
> space directly?
>
Answer: If the publisher has their own, nation-wide, sales team that
brings home the bacon, then forget the network.
If not, just weigh up the cost of paying the commission against the cost
of employing a sales team. How much would that take out of your ad Web
revenue?
In the UK, Web publishers are now starting to sign up to network sales
deals having suffered a year or two of zero, or very low, ad revenue. If
the sales networks charge a high price, it is because the amount of work
required is equally high (although I would shop around to find something
better than 55%).
The problem that many Web publishers have is they know everything about
the Web, and nothing about publishing. A big part of print publishing is
marketing and advertising sales. You cannot be an amateur at either and
expect it to work.
Here's some simple arithmetic based on a print publishing model. Put
your own figures in.
Product cost 2000
Sales and marketing cost: 2000
Total cost of operation: 4000
In order to make, say, a profit of 2000 on the above you would need to
sell your ad slots for a total of 6000
Look at it another way
Sales revenue........6000
Less cost of sales...2000
....................______
Leaves net revenue...4000
Less product cost....2000
....................______
Leaves profit........2000
Now try it with the 55% commission scenario:
Sales revenue........6000
Less cost of sales...3300
....................______
Leaves net revenue...2700
Less product cost....2000
....................______
Leaves profit.........700
Clearly, in this example, you would be better off using your own team,
so long as you were prepared to invest in setting it up in the first
place. If currently you don't employ a sales team, then you may find you
have correspondingly low, or no, revenues.
If you need to add the cost of a sales team or to use a Network, you
will probably have to increase your ad rates, which means your traffic
(and therefore content) and customer service need to be improved. The
market will not stand thousands of small publishers increasing their
rates, so the likely scenario is that the best publishers will provide
better and better content and service, charge higher ad rates, and cut
an awful lot of the smaller players out altogether.
This will happen first in the US (if it hasn't already started), and
will follow in Europe as the market matures.
Ray Taylor
The UK Internet Advertising Report
New Media Communications, London
http://www.bizbiz.com/iar/
-------------------------------------------------------------------------
This week's Online Advertising Discussion List sponsor:
Q: Is it true that advertisers pay no commissions in the Adbot Network?
A: That's right. If you win an auction, what you bid is what you pay.
adbot: the auction market for internet advertising (tm) http://www.adbot.com
-------------------------------------------------------------------------
Online Advertising Discussion List To Unsubscribe send UNSUBSCRIBE
http://www.o-a.com/ to online-ads-request_at_o-a.com
