@d:tech Highlight: Pricing Online Ads

by Debbi Swanson, May 3, 2001, 12:00 AM

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Scott Kurnit, CEO of About.com and John Ardis, VP of Marketing for ValueClick debated the relative values of cost-per-million, cost-per-action and cost-per-click the first day of @d:Tech in Los Angeles. Ardis joked that ValueClick has come to call it "CPW - cost-per-whatever."

In a packed room, which Kurnit noted was made up of twice as many sellers than buyers, they two agreed on most aspects of the online ad/message marketplace.

When fitting pricing to business - that is, how much to sell your online advertising inventory for -- Ardis noted that "There's no one approach. It's very testable." He agreed that price is driven by both the brand and the advertising's expected or proven results.

"Don't sell the rate card," said Kurnit, who says About has more ad pages in print than any other company. Suggesting that measurability is relative to the medium, he cautioned that those used to online measurability have to realize you don't have the same level with magazines.

With client Oven Sensations, Kurnit says they're now integrating recall into their measurement. "It's not an Internet style of measurement, but we want to measure increased purchase intent. Not just clicks but what people are thinking at the checkout scanner."

Given that the panelists were preaching to the choir on the advantages of online measurability over offline advertising vehicles, they did acknowledge that the business is in the early stages, discovering how online integrates direct response, email, branding, into one medium. Kurnit is adamant that the online industry has completely undervalued itself compared to offline advertising.

On the future of pricing, Kurnit predicts, "prices will continue downward before they begin to ascend. And that will take nine months to a year." "We're (ValueClick) performance based," says Ardis. "Performance equals pricing plus results. I'm certain we'll see pricing evaluations change the market."

"If you've got a web site with 1.1 billion web views a year and it's flat, they're gonna take the CPM down to build traffic. That's Yahoo! There's an oversupply of Web inventory due to the irrational over-exuberance in the market," says Kurnit. We've learned there's a BIG difference in inventory. Customer acquisition depends on the environment, between reaching someone when they're excited about your product vs. just exposing them to your name."

Both agreed that creating marketing/advertising partnerships between clients and online agencies is the key to long-term success. "Those looking at only CPM will be putting their resume together soon." Says Ardis.

"We blow the doors off all other media with sheer capabilities," says Kurnit. To be tied to CPM, he says you "have to have control over the creative. Sign the contract and put it in the drawer. Be smart as a seller; believe in the product you're selling. Go back to Charmin and Mr. Whipple. How did that ever get on the air? No network guy wanted that!"

The question was asked, "What's our responsibility to prove online effectiveness?" "We want the money so we have to do it," says Kurnit. "At least at these early stages of the business. Maybe later we'll be more like offline advertising. No one knows TV works - they use unscientific methods like measuring recall via interviews to tell us it does."

He cautioned that if a client has a crummy product and he wants performance-based advertising, you're in trouble. We have to stop burning inventory." Ardis added the old joke about advertising - "Advertising makes a bad product fail faster."

Ultimately it's about blending traditional CPM with cost-per-acquisition. "It's hard to focus on scale and growth when your focus is only on cost-per-acquisition," says Ardis.

Kurnit wryly summed up the entire process: "This stuff is a lot harder than we thought it was in the low hanging fruit days."

- Debbi Swanson may be reached at WriterDeb@aol.com