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NONE: ONLINE-ADS>> Demand and competition on the banner market

ONLINE-ADS>> Demand and competition on the banner market

TLee_at_webcmo.com
Tue, 20 Oct 1998 16:52:13 -0500 (CDT)

The current online banner market is a twisted market: high
prices, huge unsold inventories and low penetration. There
are many statistic numbers about this market. However, these
numbers are unable to disclose the structure and movement of
this market. Today, we try to depict the demand and
competition of this market based on web marketers' banner
choice behaviors from WebCMO's online banner choice survey:
Understand advertisers' preferences.

1. Basic demand curve

We have studied 5 banner price schemes: $5, $15, $25, $35,
$45. (CPM) What are the market penetration under these
prices?

price penetration
$5 50%
$15 44%
$25 48%
$35 40%
$45 32%

2. If web sites can increase banner promotion effectiveness
by content targeting, what are the market penetrations?

price penetration
$5 67%
$15 61%
$25 65%
$35 57%
$45 49%

3. If large and medium traffic web sites HOLD their high
price at $45 CPM, but small web sites charge different
prices, what is the market share for small web sites under
such competition?

price market share (for small web sites)
$5 41%
$15 35%
$25 38%
$35 31%
$45 24%

4. If large and medium traffic web sites HOLD their high
price at $45 CPM, but small web sites charge different
prices and increase their banner promotion effectiveness by
content atrgeting,, what is the market share for small web
sites under such competition?

price market share (for small web sites)
$5 58%
$15 52%
$25 55%
$35 48%
$45 39%

The above market demand and market share simulations are
based on the Discrete Choice Analysis of our survey data
(220 valid respondents with a total of 2104 valid choices.)
Market penetration indicates the percentage of the web
marketers who are willing to purchase banner services at
that price. Market share indicates the percentage of web
advertisers (among all advertisers who are willing
topurchase banner services) who are willing to put their
banners on small web sites.

We have noticed that the demand curves are not as what we
have expected: the decrease of price from $25 to $15 does
not increase the market penetration. Instead, the market
penetration decreases. One explaination is that currently
lower price signals lower banner promotion effectiveness. We
conducted the follow up survey on this issue. From the data
we have received, we are unable to make this conclusion. We
are conducting new survey to solve this puzzle.

If you are not familiar with Discrete Choice Analysis and
Conjoint Analysis, please read "Understand advertisers'
preferences" at our web site.

The simulations we present here are only a few market
simulations from thousands possible simulations. If you want
to see other simulations, please participate in the survey
to receive your free report. Or you can purchase the report
(plus 5 customized simulations) later at US$995.00.

Tim Lee
Director of Research
http://www.WebCMO.com
A site dedicated to web marketing research.
WebCMO Digest--free e-zine about web marketing research & strategy

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