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NONE: RE: ONLINE ADS>> Ad-Bytes - Barter Advertising
RE: ONLINE ADS>> Ad-Bytes - Barter Advertising
Andy Rebele (andy_at_clerk.com)
Tue, 25 Mar 1997 20:09:44 -0800
"Mark J. Welch, Esq." <markwelch_at_ca-probate.com> wrote:
>I think the issue is that a huge amount of the "paid advertising" that
>we see reported and tracked by various agencies and consulting firms
>are actually not paid advertisements at all. Indeed, I strongly believe
>that a lot of "paid advertising" reported in the annual reports of
>companies like Netscape, Lycos, and Microsoft are actually not
>traditional paid advertisements -- instead, they are ads "sold" on
>the (wink, wink) basis of trading purchase orders for identical
>amounts to make it appear that there are "real" transactions going
>on. That way, you can show your company going from $2 million
>in sales to $22 million in sales, with $20 million being banner ad
>sales. (Of course, there is value there -- traffic building, brand
>awareness, maybe even real sales generated from the ads.)
This is true. In my experience, some CFO's of web companies that make their
money from advertising count as revenue all barter advertising, and some do
not. (I know of specific examples of each.) It depends on how conservative
the CFO is.
This is related to the issue of face-value advertising, overdeliveries, and
other bartering. Most sites charge a higher face value for their
advertising than the effective rate. For example, they charge 2 cents per
ad, but only sell 40% of their ad inventory. They overdeliver the ads they
DID sell, so the effective ad rate is 0.8 cents per ad delivery. You might
argue that the real value of the advertising was 2 cents because that's the
value on which the customer based his/her buying decision, but that's not
true because most advertisers are keenly aware of sell-through rates (and
therefore overdelivery rates) on the sites on which they advertise. They
base their buying decisions on how many deliveries they think they'll
actually get rather than the number they have contracted to get. (Microsoft
especially behaves in this way.)
How are these issues related? If a site has a face rate of 2 cents and an
effective rate of 0.8 cents, then the revenue that they claim from barter is
overstated by a factor of 2.5. Perhaps that's why they don't just say their
ads cost 0.8 cents and sell all of them.
Andy
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