Recently fellow Online Publishing Insider David Koretz wrote about four ideas he thought were terrible.
I agreed that a couple of them were indeed terrible. But one comment to the blog immediately took issue with Koretz' assertion that ads should not be sold on a CPM impressions basis. Koretz said
that publishers should develop better technology to target ads to the right readers as Google does -- so by optimizing ads on a per-click basis, like Google, publishers too can earn revenue to match.
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
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!