Do Garage Sales Lose More Money Than They Make?

by Ari Rosenberg, Sep 13, 2007, 2:45 PM

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An extremely well-manicured lawn increases the value of a home, right? How can it not? But what if you held a garage sale every weekend (assume a never-ending supply of broken lamps, old golf clubs and board games). Does the revenue earned from selling stuff neatly strewn across your lawn on a regular basis make more economic sense than keeping your landscape consistently immaculate? In the short term, one costs you money; the other generates cash flow one buck at a time. But if each approach works, which one works better over the long term?

Online publishers are facing this issue in their own backyard.

The issue is (still) that of clutter. So many online publishers are stuck in it because they have built their revenue goals around multiple ad units running multiple advertisers all on one page view. We tend to forget (or ignore) that a page view is seen by only one set of eyes and ears, so three different voices (or more) speaking at the same time results in no one being heard clearly.

The opposing approach is to roadblock your page views so one single advertiser occupies your multiple ad units at the same time (also called "companion serving"). This presents a much cleaner look and feel to your "lawn" and visually increases the value of your real estate in the eyes of the user; the advertisers, who care more about your brand then about click-through (by default, the yield diminishes in this type of execution); and your editors, who are often adverse to the cluttered look of online advertising. Page-view exclusivity with one single advertiser makes the presentation of the content appear cleaner.

The issue then becomes a pricing one. Can you obtain similar revenue for multiple ad units on one page view occupied by a single advertiser, versus selling multiple advertisers into those spots? Let's look at a real example. CNNmoney.com often sells both of its ad units on its home page to one advertiser for the entire day. Now look at Newsweek.com, which often runs as many as five different ad messages on its home page at once. Who is making more money? I can't answer that -- but it's clear which one is creating greater value in terms of the exposure the advertiser enjoys.

Despite the emphasis on the performance of an ad campaign online, it is critical that online publishers increase the value of the ad exposure before a single click-through occurs. Selling each page view (or in this case home page) to one single advertiser accomplishes this goal.

In the case of Newsweek and many others, the presence of so much clutter forces advertisers to examine the value of their investment on the basis of click-through (and conversions) only, because they have such a hard time seeing any value beyond that with so many competing messages appearing at once. So while Newsweek (and I don't know this for a fact) may be earning more dollars in the short term, it appears CNNMoney is delivering greater value, which should return greater dollars in the long term.

Selling multiple ad units to multiple advertisers on a single page view has the look and feel of a garage sale. Selling one single advertiser multiple ad units on a single page view has the look of a well-manicured lawn. Which approach produces greater value lies in the eyes of the beholder -- and garage sales tend to be an eyesore.

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