Re: Buy $40,000, Sell $60,000

From: Brian Shepherd <bshepherd_at_lycos.com>
Date: Wed, 16 Jun 1999 09:40:23 -0500 (CDT)

DAVE OLMSTEAD WROTE:
<I do not agree. If my company could afford $40,000 a month
<we might consider it. but as a smaller company, we might be
<able to afford $10,000 per month get more time on the Web,
<understanding that we would have to share. This is about
<like a search engine - and we would be one site out of four,
<instead of one out of many, many more than that.

Dave,

I assume you were responding to my comment. I think you are
either missing my original point, or I didn't explain it
well enough. The original idea was to buy a banner from a
portal at $40,000 and sell space on the linking URL. You
are assuming that you MUST pay $40,000 for that link. Not
true. Here are the two options as I see them:

Option A:

Acme Third Party buys the word "golf" for $40,000 which
gives them 1,000,000 impression at a $40 CPM. Assume a 1%
clickthrough, traffic to Acme's URL, you have 10,000 page
views. That linking URL has six small companies like
yourself (let's call your company Dave's company) that have
all paid $10,000 for the position. What does Dave's company
get? 10,000 impressions that you share with five of your
competitors for $10,000, or $1 per impression, or a $1,000
CPM. All things being equal with six advertisers, that gives
you 1,167 clicks of the pie. Your cost per click is
essentially is $6.

Option B:

Dave's company buys the word "golf" for $10,000 (important:
you can buy less impressions for less money). Again, at a
$40 CPM, this gives you 250,000 impressions. Assuming the
same 1% click rate, you're looking at 2,500 clicks, BUT you
own the page!! Again, so you get all 2,500 clicks which
leaves you with a cost per click of $4.

It's 33% more cost effective to go with Option B

It's your money, but I think to pay more to be an extra step
to your site is not good business sense.

Brian Shepherd
bshepherd_at_lycos.com

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Received on Wed Jun 16 1999 - 15:41:51 CDT