Should Advertising Be Based On The Value Of The Site Or The Visitor?

from the but,-of-course... dept

Adam Penenberg's latest column at Wired News looks at the plan someone has to do a bit of advertising arbitrage by using some tracking cookies to note that people who leave popular sites are still worth the same amount to advertisers when they go to a less popular site. In other words, if you're at a popular site that can command high fees for advertising, and then move to a small site that commands a tiny fraction of the cost -- does that make sense? You're the same set of eyeballs, so the theory suggests that your views are equally worthwhile. That makes some sense, so, one guy has patented the idea of following where you go and continuing to advertise the higher rates at smaller sites, while splitting some of that revenue with the larger sites. Of course, it's unclear why this is patentable. It's really just an implementation of tracking cookies, which have been around forever. However, more importantly, it seems to be based on a misunderstanding of economics. It assumes that the value of the ads on the popular site are is the proper value of the visitor's eyeballs on the ad. That's not the case. The reason certain sites get higher CPMs on ads is because they're more effective overall -- whether it's due to reach, context or placement of the ad. It's not necessarily based on the value of the individual visitor. So, assuming this plan worked, it's likely that the ad rates for many of these larger sites would fall -- not exactly an exciting idea for them. They might be able to make some of it backup in the residual ad revenue from other sites, but it's going to make it difficult to convince them to take part. They currently benefit from the CPM model that suggests they deserve high CPMs for having a lot of traffic. Besides, if advertisers or publishers are really concerned about the value of each individual visitor, wouldn't they just use a cost-per-click system, which values every clicker equally, with no bias towards the site it's on?

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