Commentary
Boggled By Google
- by Daniel Ambrose , July 24, 2009
And this is far too important to let drop.
Koretz wrote that the top 100 publishers generate 2000% more page views than Google, but Google's targeting allows it to generate more revenue. He says publishers would generate more revenue for themselves by selling advertising on a results-driven basis "like Google."
I'm still trying to figure this out. First of all, of course, Google monetizes far more than its own page views through the Google AdSense program distributing its ads on many other sites. Google itself says 40% of its revenue is generated from its many network partners. Google is monetizing many of the page views of the rest of the top 100 sites and tens of thousands more.
But by studying many of these same top 100 Web sites, we can see that the per-page-view revenue generated by the touted Google targeting is far below the revenue per-page-view that is generated by the same sites when they make sales on a CPM impressions basis.
And I'm not sure who Koretz defines as the top 100 publishers. I looked at the top 100 sites listed in Quantcast, but only a minority would be sites I consider publishers. Most create their audience in some mechanical way, providing services like email, stock quotes, or social interaction tools. These sites are notorious for having very low value as advertising vehicles, unlike sites that publish content.
I would wager that the majority of the readers of this column work for a publisher who creates and publishes at least some original content. That environment is where high-value advertising environments are to be found. And if we compared per-page-view revenue earned on a CPM impression basis by even the most mass-oriented publisher, it would far surpass that generated by Google, by five to ten times.
My clients, who range from very mass-market-oriented publishers to very specific market B2B and hobbyist oriented, generate revenue representing from $10 to $100 per-thousand-pages viewed based on CPM advertising. And some of them generate an additional 50 cents to $5-per-thousand from Google.
No, it is not a terrible idea to sell on a CPM basis. In fact, earning revenue from impressions, not just clicks, is the only way so far demonstrated -- to maximize revenue. As Neil Squillante from PeerViews Inc. pointed out in the comments to the Koretz piece, getting paid by an advertiser only on a results basis for the scarce and valuable attention you as a publisher have earned from your audience, is a sure way to get taken to the cleaners. Advertisers will waste your scarce inventory with bad creative for bad products, even shoddy order-taking that loses customers, if advertising is priced on a per-action or commission basis. And publishers who allocate their scarce inventory to such an advertiser pay the opportunity cost of missing revenue they could have earned.
All smart businesspeople observe the world around them and try to understand what is working and what is not. Koretz has done so, and had his mind boggled by Google. Yes, what Google has done is impressive. What McDonald's did by inventing a new restaurant category was impressive too. But that doesn't mean every restaurant needs a drive-up window!
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Selling on a click basis also presumes that there is no value to the advertising message unless the ad is acted upon at that moment in time. Depending on the creative, the message can come through without a click. And the writer gets it right, many times an ad's performance ( or lack thereof) is due to excellent (or crappy) creative. ( or an excellent or crappy value proposition.) Those that purchase outdoor dont expect only to pay for customers that drive by, see the board, stop what they are doing and drive to the store. Display advertising in an editorial context has value beyond the click.
Very well said Daniel.
Once again, Dan Ambrose's insight and industry knowledge are adding value. Well put, Dan.
Excellent points. After ~10 years of working for a successful B2B online publisher, I am still on occasion asked by a potential advertiser why we don't work on a cost per action basis. I respectfully explain that we don't have to.
Dan, great synopsis of the merits of cpm vs. cpc/cpa advertising. As a publisher for 10 plus years I have rarely seen a cpc, cpa campaign that delivered a better eCPM than a straight CPM or integrated sponsorship. David's theory suggests that all internet users are ready to purchase, bottom of the buy funnel. By most reports, only 10% - 15% of users are this group. Google benefits and takes credit for the all the brand building & awareness generation that takes before any one does a search.
Daniel, thank you for quoting me and clarifying the benefits of the CPM model. I would just like to add that publishers can no longer just sell ad space. Publishers must help advertisers (or their agencies) understand how to create effective ads for their particular publication(s).
Dan, thank you for this well-written response to Koretz' idea re: CPM vs. CPC selling.
For smaller publishers, there is an awful lot of advertising we carry that does not require a click action and therefore makes this theory moot. For example, restaurant advertisers, home builders, local retail - need to align themselves with local content to remain top of mind with customers. It is building brand and top of mind awareness just like outdoor, television, radio and other media.
Let's stop shooting ourselves in the foot with focus on "click through." comScore released a great white paper in Dec 08 titled "Whither Beyond the Click" that has finally surmised the strength of online advertising beyond click through metrics, showing lift in brand awareness and in-store sales as a result of online campaigns. Koretz should take a look at the white paper and then come intern for us for a few days and learn how to sell online advertising.
Dan, I've been fighting this battle with agencies and direct advertisers since some advertising genius came up with the name "DoubleClick!" Thank you for your articulate and accurate discussion of the subject.
Good article, Daniel, that touches on what has become a recurring theme: the marketer's obsession with advertising measurability and CTR.
Different online campaigns have different goals, some of which are easier, some of which are harder to track as a result of online ads. Not every campaign has a clear funnel from click to campaign goal, unless the click was the goal. But I'd argue most campaigns don't stop there.
Just wrote a blog post on the topic: clicks, page views and other lies http://bit.ly/10Wr6c
How refreshing to read your article. Google is great for Google. It's not great for publishers. It should be the revenue source of last resort. In Some cases running Adsense can actually damage other revenue opportunities, buy allowing savvy advertisers to place CPC display ads on sites that they might otherwise have to buy on CPM. If you really feel compelled to run Adsense on your site, don't run display, keep it to text ads. Why would anyone buy a display ad from you at a premium CPM, when they could get the same position via Google Adsense for an eCPM of a few pennies?
Hello commentors...I just got back from a long and remote vacation to find that the Publishing Insiders appreciated my first column. Thanks!
It seems that Insiders understand the importance of selling and delivering Internet ads on per-impression basis...but I'm observing that there are many publishers who are either still trying to sell in a "time-and-position" basis or are confused by the demands from advertisers for results only pricing.
Does anyone out there think this deserves more discussion?
Do tell.
Dan:
You have as always hit it on the head. The reason you have , I suspect, besides being extremely knowledge and smart about on-line industry, is that you are extremely knowledge about the print industry. So many of these new ideas are simply recycled from other media and have been asked, tried and answered before. Why does the print and the TV world avoid the pay per inquiry model? Dan, you asked and answered that question in your article.