CPM rates are falling (thank God)

AdAge reported yesterday that online CPM ad prices are falling. Does this surprise anybody?

Cost-per-thousand ad impressions for online publishers are generally off about 20%, according to several people on both the buying and selling side, and sell-through rates are dropping. And where publishers used to unload 60% of their inventory, some are now able to sell only 30%.

But perhaps indicating more trouble ahead is just how cheap the low end of the market has gotten. An August study from the Interactive Advertising Bureau and Bain Capital found the average CPMs on ad networks ranged from 60 cents to $1.10, only 6% to 11% of the prices publishers could command when they sold inventory directly. And the pricing for networks appears to be getting worse not better.

The report notes that, blah, blah, supply and demand, blah, blah, direct response, blah, blah, ad networks, blah, blah, spray and pray, blah, blah, click-through rates, blah, blah, “It’s like crack,” blah, blah, blah. Go read it for yourself. This is a significant issue, but like so many others in this day of disruptive innovations, it will not be resolved from within the industries affected; there’s too much to lose by changing.

The Web is not now, nor has it ever been a CPM medium. It’s that simple. That it has been used as one is the result of four related things:

Innovation never comes from the fat cats who suck on the tit of the status quo. Things are comfortable. There’s no incentive to change. When your life is based on broadcast and print CPMs, the only ad model you see is, well, CPMs.

The ad industry needs wants a static playing field. The movers and shakers within the ad industry want the creative and the ability to manipulate reach and frequency to be the difference makers in ad campaigns. It’s what they know. This requires an arena that sits still. The Web is a dynamic, moving target.

Web publishing has been driven by a print model since the beginning. Newspapers dragged their advertising concepts with them (and then gave them all away in the name of “bundled” ad packages) without stopping to consider that the Web isn’t conducive to an ad-supported content model. TV stations did the same thing by first copying the print model, then using the display avails to add value to TV ad campaigns or to actually drive those campaigns.

Contemporary advertising demands a helpless, captive mass. I’m always amazed at how little Madison Avenue thinks people know about advertising in particular and hype in general. Whenever I introduce the idea that people are actually fleeing from the relentless carpet-bombing of unwanted messages, it draws various WTF shoulder shrugs. “You’re kidding me, right?”

CPM stands for “Cost Per Thousand.” Thousand what? Sets of eyeballs. Dehumanized receptacles propped open with toothpicks (thanks Doc) that leave behind piles of dollars. And if you don’t think the people formerly known as the audience realize this, you’re living in a cave.

Moreover, Madison Avenue has been ignoring the wisdom of web usability guru Jakob Nielsen, who has proven that nobody even sees the bloody CPM-based ads anyway, so this sudden discovery that the CPM model is failing really can’t come as a shock to anybody. They don’t work, and who would know that better than the people who are actually paying for the ads — the advertisers. They’re now routing around the ad industry and becoming content companies that can play in the real world of the Web. Yes, folks, advertising is content in the Media 2.0 world. As money gets sucked away from CPMs and moved to promotions, social networking, and other forms of content, Madison Avenue is left scratching its collective head.

It’s ironic that Hollywood has discovered the world of advertising and marketing as a form of comedy and drama. We have AMC’s “Mad Men” and TNT’s new “Trust Me.” These are shows that academics will view with amazement from the culture museums of tomorrow.

The good news is that when the bottom is completely torn out from underneath all the blue smoke and mirrors, we’ll actually get on with the business of enabling commerce for businesses and their customers.

Comments

  1. Most exclnt. Especially “The good news is that when the bottom is completely torn out from underneath all the blue smoke and mirrors, we’ll actually get on with the business of enabling commerce for businesses and their customers.” My soapbox is that unless you are Google with a marginal cost of ad delivery very close to zero, CPM’s on the web is drinking the Kool-Aid.

    No doubt there will different strokes for different folks. But ,consider that most bands make their real money from concerts (events), the music (information ) is mostly a way to aggregate fans. T-shirts, baseball caps, concert tickets. Real stuff for real people for which they happily give silly amounts of money.

Trackbacks

  1. […] RELATED: Terry Heaton — CPM rates are falling (thank God). This entry was written by Tim Windsor, posted on January 27, 2009 at 9:00 am, and tagged advertising, business model, innovation, local, revenue. Bookmark the permalink. Follow any comments here with the RSS feed for this post. Post a comment or leave a trackback. […]

  2. […] News You Can Endow. A NY Times op-ed that suggests turning newspapers into non-profits is the way to go. It’s an argument that’s gaining some steam but, like most of the other business models being championed, seems predicated on the idea of saving newspapers exactly as they are, something the market has decided isn’t working. Somewhat related: CPM rates are falling (thank God), by Terry Heaton, in which he argues that getting past CP smoke and mirrors will be a good thing. […]

Speak Your Mind

*