NONE: Re: ONLINE-ADS>> Low cpms mean death
Re: ONLINE-ADS>> Low cpms mean death
jgehman_at_creativelabs.com
Thu, 8 Oct 1998 21:52:50 -0500 (CDT)
Bob Gordon wrote:
>We have invested millions of dollars into the content
>that appears in our site and I will be stupid if I let
>an agency grinder destroy our worth by insisting that
>ridiculously low cpms are the only way to buy Internet
>advertising.
Circa Wired Ventures, someone put a $40 CPM (or whatever
CPM) stake in the ground. A bunch of Web dreamers, VC firms
and Wall Street analysts made the case for a slew of
Internet businesses predicated on "high" CPM business
models. Is it still a $40 CPM world?
There are many pricing models out there. Some use a margin
model, cost plus, stepped-variable, etc. Airlines and
hotels use yield management and customer segmenting. But in
the end, there is always an intersection of Supply and
Demand. Period. Jaffer gave a nice run-down of CPMs for
various media, but on the Web do we even have enough track
record to say with certainty where the CPMs will land? Have
we reached stasis?
Right now, there is a huge imbalance in Supply of and Demand
for Internet advertising. Specifically, over-supply,
under-demand, illegitimacy (as a medium) and perishibility
(of inventory) all converge to create a vicious economy.
There is simply not enough experience, no precedent to
follow and too few signposts. The result is much
disillusionment.
Besides ignoring the irrelevance of sunk costs, a "build it
and they will come" mentality just isn't working. Many
publishers have business models that depend on CPMs that
seem "too high" to advertisers. Advertisers can't justify
the CPMs because the back-end performance is abysmal. What
gives--the CPM or the CTR? While many Web marketers talk
about branding, somehow "the most measurable medium" has yet
to overwhelm any of the big consumer brands enough to do
more than meddle--a few impressions here or there. Why?
Bob Gordon wrote:
>If low CPMs become the norm, it will reduce the overall
>effectiveness of the Internet as an advertising medium,
>because there will be no original content published.
Let's thinks about junk mail. Ever consider why it's called
"junk?" Because you don't want it. The minute a piece of
bulk mail interests you, or is useful to you, it ceases to
be junk. In an ideal world the DMer is no more interested
in sending you junk mail than you are in receiving it. The
holy grail is 100% targeting, no waste.
The Web has long promised 1:1 marketing, but what does that
mean? At a very abstract level, perhaps 100% targeting.
Nirvana marketing: right message, right place, right time,
right person, etc, etc. Meanwhile, we slug it out to get 2%
CTRs. We've been conditioned to think 2%. And at 2%, $40
CPMs just don't work. This makes either 2% or $40
unacceptable! And if one-to-one means 100% (ok, maybe 75% in
a practical implementation), perhaps the CPMs will
eventually be able to hit $40. As long as 2% CTRs are the
norm though, "low" CPMs will also be the norm. Free market
economics cannot be thwarted.
How should this work? Real-time ad banner selection based
on who the eyeball is. A highest bidder model, where every
target is efficiently paired with its highest probability
message. Centralized serving of all ads. Complete
integration with site analysis. Real-time integration of
company and third-party behavior data. Complete tracking
from the first impression the potential customer ever sees,
throughout the customer's lifetime.
The companies best able to push tool vendors to do this are
the big content sites (search engines, portals, news sites,
etc). Since most of these sites can't sell their inventory
as it is, they have no incentive to target more effectively.
More effective targeting==> Less inventory required to
reach same goal==>Even more unsold inventory==> Further
pressure to lower CPMs, etc. No targeting means all
eyeballs are created equal; banners are a commodity and
price wins. Looks like we'll keep living in a 2% world for
now. And a 2% world means no $40 CPMs. Too bad.
Without finding ways to improve targeting, the Web may
indeed be destined to be a fringe medium, relegated to
trivial portions of overall ad spend. Is this what has
happened to DM? Does this mean that CTRs may be the best
barometer for the Web's legitimacy and future growth?
Perhaps Internet ad spend as a percent of total advertising
dollars will never exceed the Web's average CTR.
Two-percent average web CTR==> 2% of total ad spend!?!?
Call it Gehman's Law. Hey, Moore's Law sounded funny at
first too.
===========================
Joel Gehman, Internet Marketing Analyst
mailto:jgehman_at_creativelabs.com
408-428-6600 x6904
========================================================================
------------------------------------------------------------------------
This week's Online Advertising Discussion List sponsors:
AdKnowledge, Liszt and Mind the Store
Double the effectiveness of your next web advertising campaign.
How? With AdKnowledge. For complete details, contact us.
http://ads02.adknowledge.com/SmartBanner/page/9751.4
---
Want 20-50,000 clicks/month? Sponsor Liszt, one of Yahoo Internet Life's
"10 Net Essential" sites. Slots open include Books, Chat, Downloads,
Jobs, Movies, and News: http://www.liszt.com/o-a-offer.html
---
ClickToBuy is an advanced e-commerce technology allowing Advertisers to
sell products directly from their banners or images. Call Michael Tingle
at 800-254-9992 or visit http://www.hotflyers.com/demo for more info
------------------------------------------------------------------------
========================================================================
Online Advertising Discussion List To Unsubscribe send UNSUBSCRIBE
http://www.o-a.com/ to online-ads-request_at_o-a.com
