Last I checked, the wheel has already been invented, gravity has been defined, and 1 plus 1 still equals 2. So why is it that seemingly reputable research companies that use words like “leading” and
“cutting-edge” to identify themselves, keep trying to pass off common knowledge as new discoveries.
For example, a certain company, which shall remain nameless, recently released the results of
analysis that “underscores the importance of businesses identifying and targeting their most profitable customers.” Ready... Set... DUH!!! Targeting is important? Who knew!
The company’s official
news release states that the top 20% of online shoppers who spent at least $1,000 per year online account for 87% of the total consumer online sales market. Do these guys really think they can make a
living spouting the old 80/20 rule: 80% of your business comes from 20% of your customers?
The release goes on the say that in order to capture and retain this valuable group, businesses need to
“understand their customers to determine which are making online purchases, what attracts them and how to keep them.” What’s more—and this truly is a revolutionary concept—the researchers found that
shoppers spending the most money online are likely to be—get this—affluent! It all seems like sophomoric attempts at legitimate research, doesn’t it?
The purpose of this column is not to tell you
that there are worthless research firms out there that regularly regurgitate yesterday’s findings. It’s to caution you about online advertising research in general. Many of us use stats and numbers on
a regular basis, and many of us have no idea where those numbers come from. Especially when it comes to ad spending totals and average CPM.
Many of our online readers have written to me in the
past, asking the same question: “What’s the average industry CPM I can take to the negotiating table?” Average CPM is directly related to total ad spending, but the range of web ad spending totals for
the first half of 2000 is, to say the least, confusing—from IDC’s $2.4 billion, to the IAB’s $4.1 billion, to AdZone’s $6.3 billion. So how do you figure out the average CPM?
When AdKnowledge said
the year 2000 average CPM is about $34, the number seemed unreasonably high. And not just to this cynic. eMarketer recently examined all of the above predictions and came up with a much more
reasonable first half of 2000 total—$2.6 billion—and consequently a much lower average CPM.
They even dared to go against the venerable IAB, stating that the IAB numbers are too high, and must be
reduced to take account of barter transactions and errors in its methodology. Additionally, honesty aside, there are many other sources of error, eMarketer says, taking particular aim at basing
predictions on published rate cards. “Rate cards for CPMs are routinely discounted; by how much, no one knows. Estimating spending on Internet advertising using rate cards can create wildly inflated
results.” So, applying eMarketer’s estimate of first-half spending to the reported average CPM of $34, we come up with an actual effective average industry-wide CPM much lower than what we’re used
to—$14.40. (Check out www.eMarketer.com for the formula.)
And yes, you can take that number straight to the negotiating table.
Masha Geller is the editor-in-chief of MediaPost. She can be
reached at masha@mediapost.com.