The Primary Problem With Online Display Is Audience Value

Online display advertising is getting hammered these days -- and as a result, it's truly a buyer's market out there. But maybe this is an opportunity for the industry to take an objective look at itself and determine the correct path to follow for the future?

According to both an IAB and an eMarketer study from late 2008, the average CPM delivered via ad network inventory is 60 cents to $1.10. This is in opposition to an average CPM for direct-sold inventory of $10-$20. Regardless of the exact nature of these studies, no one disagrees that the trend over the last five to six years has been a decline in display ad pricing, but the primary reason that pricing has dropped is not because of an increased supply vs. a steady demand, it's because publishers don't believe in the quality of their audience.

Over the last two years, publishers have designated more and more of their inventory for the ad networks, with as much as 30% of inventory being pushed through them in 2007 (an increase from 5% in 2006) and likely much higher in 2008 (publishers like ESPN are the exception, as they no longer sell their inventory to networks). As more inventory goes into ad networks, buyers know they can push harder on prices, driving them downward.



Online display pricing is also eroding, as marketers are acting on metrics that publishers cannot control. The simple fact is, the majority of marketers who spend online are spending to drive metrics, which are evaluated on actions --- but the publishers can only maintain control on exposure. Many publishers will tell you they don't sell their inventory on a CPC or CPA, but those same publishers will tell you they have an established rate card, too.

The fact is that everybody sells a portion of their inventory on performance, and everyone can be manipulated by an advertiser with a large enough budget! If you look at the top 10 advertisers online, I expect you'll see that at least 75% of what they run is evaluated against some type of immediate or intermediate response metrics (meaning they evaluate performance based on clicks or conversions). When they optimize budget they optimize against clicks or conversions, they do not optimize against CPM or efficiency, and yet in many cases they will claim they're running a "brand campaign."

What compounds my frustration is, these marketers are optimizing solely on response metrics and media methodologies rather than including creative methodologies, meaning they throw all their hard work under the bus from a targeting and media mix perspective and cut the placements they thought would do well -- when in fact they should be optimizing creative! If you default to optimizing the media, then you're basically stating that your media planning was flawed and the creative you have is perfect (let me be the first one to tell you: it's not).

Many marketers pretend to be driving "brand awareness" and default to response metrics so the pricing follows suit when it cannot be held to the same standard. Brand campaigns should be about efficiency of exposure and reaching the largest possible targeted audience -- but almost no one looks at it that way, and the publishers let it happen. In many cases, especially when you pay a premium for a targeted placement, the creative needs to do a better job of conveying the message -- or maybe, just maybe, your expectations of immediate action are unrealistic!

Some publishers may begin to consider shifting to CPC- from CPM-based pricing for their display. My response to that tactic is, you're missing the boat! Display can be priced at a premium if you ensure the media buyers cannot go around your direct sales team and buy the same inventory from a network! Your premium pricing can be maintained if you feel your audience is of quality. If you jump to pure CPC pricing, that translates to an utter lack of confidence in your audience and your ability to maintain a competitive advantage. That effectively drags down the value of exposure in this medium and damages more than just your perception in the marketplace.

The other side of the coin is that all online marketing should be about actions and all pricing should convert to a CPC or a CPA, but I would use video to disprove that theory. Online video does a great job of maintaining its pricing and conveying the value of an audience. Online video CPMs are maintaining pricing around $20, according to an eMarketer survey. That price may be less than it was two years ago, but that's due to the increase in volume of inventory and is a natural expectation of an emerging market. Marketers appear to value video as an exposure, so why can't they value display as an exposure as well?

Maybe the solution lies in the actual size and use of display itself. Maybe the sizes we have and the methods of how they're being used are the problem, and not the solution? Maybe publishers need to evaluate the sizes they're offering and their effectiveness at breaking through the clutter to present a message to consumers? Remember the 468x60? Its days are long gone -- all because we woke up to its ineffectiveness. Maybe therein lies the solution for display?

Decide for yourself and tell us what you think by responding on our message board. I like to hear what you have to say!

13 comments about "The Primary Problem With Online Display Is Audience Value ".
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  1. Rich Moore from Allison+Partners, February 18, 2009 at 12:01 p.m.

    online world has changed
    advertising looks the same
    influencer ads!

    credit Jim Calhoun, CEO, Popular Media

  2. Jonathan Hutter from Northern Light Health, February 18, 2009 at 12:16 p.m.

    Great column. While advertisers may love the low CPMs the networks are making it all a commodity. You can't tell one network from the other. I've seen so many network presentations that claim they only sell premium, "above the fold" space, with unique targeting and reporting methodology that will maximize the response and effectiveness.

    As Cory says, more often than not, effectiveness is related as much to message and creativity as to the media buy. This was true in traditional direct response, and it's true in online display. Online display works, if it's used correctly.

    Jonathan Hutter - Portland, Maine

  3. Erika Nagy from microsoft, February 18, 2009 at 12:30 p.m.

    I'm not sure when the average CPM for pubs has been $10-20? Publishers would love those rates, don't get me wrong, but that range is WAY off. Maybe back in 1996 or 1997, but I would argue that rates have been well in the single digits, even direct, for quite some time.

  4. Ben Johnson from Interactive Internet Websites, Inc., February 18, 2009 at 12:52 p.m.

    Great article.

    The discrepancies between premium rates and network rates are so extreme, they are a clear indication that something (or several things) are broken.

    In some cases, the premium prices may be too high, and publishers haven't faced that reality. Rather than dumping excess inventory onto networks, they would be better served by reducing their direct-sell rates (at least for less attractive portions of their inventory) and not selling any of the space through a network.

    But, I suspect page layouts are poorly designed and overly cluttered, ad sizes tend to be too small, and creative hasn't been optimized.

    Compare the creative impact of the typical network TV spot today with the analogous spot in 1960. Until the industry figures out what creative approaches work best, it will be impossible to achieve the full value of online ad space.

  5. Joe Fredericks, February 18, 2009 at 12:58 p.m.

    "but the primary reason that pricing has dropped is not because of an increased supply vs. a steady demand, it's because publishers don't believe in the quality of their audience."

    You really believe this or is this a clever hook for your article? Ya got me.

    Of course, there is a huge increase in supply and, now, a decrease in demand.

    It's a buyer's market. Advertisers with budgets to spend hold all the cards. What is needed for the publisher (and advertiser) is more ways to bring value to their inventory.

    Sorry. I don't believe for a second that using the direct sales team is the answer. That's a short term solution. In fact, as you and others may know, the increasing use of the exchange model will segment the sales team - one side publisher ad trader, the other direct seller offering integrated sponsorships.

    Nevertheless, you raise a good point about bringing value to display - which is at the core of the exchange model. Advertisers, publishers, tools providers will all bring value to the transparent exchange and potentially make each ad impression premium.

    In spite of the challenges of certain exchanges today, as liquidity improves, the scale, targeting capabilities and, most importantly, ROI will make exchanges the future of display advertising.

  6. Robert Mcdaniel from AdOn Network, February 18, 2009 at 2:30 p.m.

    Some interesting comments, but I think the article is largely drawing the wrong conclusions.

    Starting with the statement about the decline in pricing not being because of an increased supply vs. a steady demand, the next paragraph goes on to say publishers are opening more of their inventory to ad networks where the price is low. How exactly are you defining supply and demand? Pubs wouldn't be opening it up to ad networks at a lower CPM if they could sell it themselves at a higher CPM. More unsold inventory means more supply or less demand no matter how you try to angle around it.

    Also, the premise of the article is around the value in the quality of a publisher’s audience, but you never define quality. Is quality just unique eyeballs (i.e. exposure)? I'd infer that definition from the rest of the article. And yet you say we 'woke up to its [468x60 size banners] ineffectiveness'. How are they ineffective if they garnered exposure? You're measuring ineffectiveness in some manner, and I’d venture a bet it’s on clicks or conversions.

    Ultimately though, even brand advertisers want to measure the effectiveness of their campaigns - i.e. brand lift - that is most often measured by increased sales. If the quality or audience value brand advertisers were getting from display advertising exposure was significant, they'd be lining up all day to buy more. Since they aren't, that seems to indicate quality or audience value is lacking. Could be the medium (i.e. size and use of display) or the message (i.e. creatives), or both, and you do acknowledge the creative can often be some or most of the issue. However, I don't think publishers closing off their inventory to ad networks will allow them to sell any more of that inventory directly at higher CPMs. Quality or audience value doesn't seem to be there, or at the very least, not there at the prices the publishers want.

    While both the medium and the message present problems for display, I think the only true way to gauge quality and audience value is some measure of performance. The medium and the message go hand in hand to try to produce the desired performance, which could be an interaction with the ad unit, a click, or a conversion.

  7. Maxine Trowbridge from, February 18, 2009 at 3:14 p.m.

    Its all about the audience and relevant content. Advertisers want a targeted audience, as a small publisher for a niche audience the value lies with providing clients the exact audience they are targeting their brands at. Who cares about bigger is better, obviously its not since its driving down CPM rates. I have nothing to do with ad-networks, direct sales only focusing on a niche audience and local demographic with affiliate networks as fillers. No one in print advertising attributes CPC to a magazine, yet brand advertising has been successful for decades. CPM provides a measurable brand campaign, but it has to be towards a targeted audience.

  8. Jonathan Mendez from Yieldbot, February 18, 2009 at 4:06 p.m.

    Better creative leads to better performance leads to higher value for content. So fix creative and you fix display. Cory, I couldn't agree more! Yet ironically, it is technology that will solve this problem. As I tell anyone that will listen, technology is the new creative.

  9. Chris Dorsey from Forum Communications Company, February 18, 2009 at 4:19 p.m.

    Right on Cory.

    As we state over and over again within our organization...

    It is not the medium our client chooses (print or digital) but it is the message that is important.

    If we deliver it how, when and where they want, they gladly pay for it.

    Chris Dorsey, Forum Communications, Fargo, ND

  10. Sandro Nazzoni from PlayPhone, February 18, 2009 at 5:51 p.m.

    By running a few display ads campaigns this year, I can say for sure that the standard banner ads and even flashy ones are not doing the trick when it comes to engage the user. Actually one secret sauce ingredient is engagement, you need to make users interact with your display ad, or at least show them an added value, so they will follow through with your conversion funnel. My 2 cents.

  11. R.J. Lewis from e-Healthcare Solutions, LLC, February 19, 2009 at 5:39 p.m.

    It all boils down to responsibility. As we go through this economic calamity, which resulted from a failure in taking personal responsibility for one's actions (from the person who bought a house they could not afford to the mortgage broker and banker who financed it when they should not have) is there any better time to revisit the responsibilities of the media buying equation? Here's how I see it:

    Publisher - Responsible for placing an ad in front of the correct target audience.

    Agency - Responsible for producing excellent, engaging, impactful creative.

    Advertiser - Responsible for providing a quality product at a fair price that people demand.

    All of the above responsibilities are aligned and all parties motivated in a CPM pricing model. The Internet did itself a great disservice when it migrated to a CPC, and CPA pricing model. The further down this continuum pricing moves, the more the responsibility is shifted to the publisher and away from the advertiser and agency.

    I will buy CPA ads all day long selling pet rocks at $100 each and I'll pay a $90 bounty... but what publisher in their right mind will take that? They have no control over my pricing, or the quality of my product. If I do get ANY distribution of this campaign it will be on garbage properties, for which no one is willing to pay a CPM (and my leads will be garbage too - which is more costly than having not secured any to begin with).

    Quality advertisers and agencies WANT to pay a CPM, because with a great product and a creative campaign, they can secure a high quality audience AND a reasonable "cost-per" outcome. When all parties are meeting their respective responsibilities and firing on all cylinders, results are spectacular.

  12. Ron Stitt from Fox Television Stations, February 19, 2009 at 5:45 p.m.

    re; Cory's entire post: STANDING OVATION.

  13. Ruth Barrett from, February 20, 2009 at 1:09 p.m.

    Give up the ship and learn to fly.

    Print advertising has always been a poor performer when measured in terms of response and when carried over to the online world it is not performing much better. Check out DMA studies of response effectiveness by medium and by industry.

    Advertising especially media buying and creative services are locked into a mindset and committed to metrics that are simply inappropriate for the Web environment, especially smart Webs, backed by databases. And the publishers?
    Ditto. Many come from print and are seeking ways to protect their core (and traditional) business.

    Shifting from a transaction business model to a relationship one, in terms of customers and prospects, is one strategic move for all the players - advertisers, publishers, and advertising agencies - that will shift marketing into the electronic age for real.

    And, if online video is "TV ads revisted" they too will not measure up, indeed, may be judged by the audience as just plain intrusive and contribute to the backlash against advertising,

    As marketers we need to press for innovation and fresh approaches that the Web environment encourages.

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