Prior to Internet advertising, the Excel column under the spotlight was a "cost per thousand" (CPM) paid to reach the client's designated target audience, Today, all eyes zoom to the column promoting a "cost per desired action" achieved. In either case, wasted exposure negatively inflates this "cost per something" that media buyers hang their hat on.
Conversely, a publisher's goal is to sell as much inventory as possible at the highest price the company can obtain. For example, print publishers prefer selling a national page, even at a significant discount, to selling a regional ad at rate card. Volume is more important than price, and therein lies the contradiction between the goals of those who sell media, and those who purchase it. While one is trying to minimize waste, the other is loading up the trunk with as much inventory as they can fit.
The result is a pricing tug of war. It is a polite, professional war fought with courtesy and respect (most of the time), but nonetheless, a real war--with no resolution in its future. If these battles are inevitable, it is crucial for publishers to understand the new battleground that Internet advertising has broken. The price paid is where the line used to reside, but online media buyers have successfully moved the middle ground to what they are willing to pay for.
This, how shall I say, is not good news for publishers. It means inventory sold at a higher CPM has to perform better than inventory sold at a lower rate. That's why you hear about online inventory being sold at below a dollar CPM, or buyers stating they will pay higher CPMs, but only if it works out on the back end.
So how should publishers operate in an online advertising market so heavily influenced by direct marketing metrics? First, acknowledge that buyers purchase your inventory on a CPM basis but are evaluating you on a "cost per something" when you are not looking. Ask the question of how backend metrics will be derived. Results are out of your control, but you could package and position your inventory to appear more in tune with these goals (perception is everything). Secondly, publishers should have a definitive pricing strategy in place--as opposed to explaining one after the insertion orders come in. This strategy has to accomplish the dual goal of a)selling more volume of premium priced inventory, while b)still fitting inside the performance parameters buyers have established.
One way to accomplish this dual agenda is to identify high profile, highly trafficked areas of your site (for example, home pages, section home pages or even entire sections). Then sell fixed positions on these pages over a fixed period of one week. This will create an ad product that guides advertisers to buy larger allotments of your inventory (much like selling a national page in a magazine). As an incentive for buyers, many of whom will resist buying one area of your site for that time period, offer these fixed positions on a purely exclusive basis (no other advertisers will be displayed) to help ease their pain. Price this fixed and exclusive inventory at a premium CPM and list it as a separate line item on the insertion order. Then look to lower the effective rate with heavily discounted run of site impressions, e-mail blasts or any other impression-generating ancillary ad products. This will allow you to sell a higher volume of premium priced inventory while still recognizing the need to bring the overall CPM in at a level that will keep your site on the charts in the "cost per something" Excel column.
My former CFO once told me that he did not fully understand our advertising pricing strategy, nor did he really care to. He just loved that we had one. It is a war out there, folks. Do you have a pricing plan in place to fight your battles?