Yes, The CPM Is Holding Back Online Advertising

from the time-to-get-rid-of-it dept

Last week, Shelby Bonnie, former CEO of CNET wrote a great guest piece for TechCrunch, where he suggested killing off CPM as a measurement for online advertising. I’d go even further, and suggest that the obsession with CPM has seriously harmed online advertising. The key point is the one that Bonnie makes first: if you pay for impressions, you create incentives to get impressions. But impressions, by themselves, are not particularly useful, especially when everyone making those impressions ignores the advertisement itself.

We’ve experienced this first hand. While we do offer some CPM-based advertising on the site, we’ve made it clear that such display advertising is a waste for most companies. Our audience doesn’t pay much attention to it at all. Ad blindness is the rule. Instead, we always suggest to companies who approach us about advertising that they would get a much better and much more valuable bang for their buck by engaging our community via the Insight Community. Doing so isn’t strictly “advertising,” but it actually gets the attention and engagement of the smart folks who hang around here. And, on top of that, beyond just getting people to see your brand, the company actually gets something of value back — insightful analysis from our community.

And yet… some of the people we speak to can’t even comprehend how getting people to engage is smarter than just pushing annoying banner ads that will get ignored. You can always tell when you’re dealing with that sort of person when they start focusing on how to calculate the CPM value of an Insight Community case. They ask how many impressions it will get. These are people who would much rather one million people totally ignore their ad, though it gets loaded in the background somewhere, than have a committed group of targeted individuals actually engaging with the brand. It makes no sense at all, but it’s the type of conclusion people come to when they focus so much on CPM. When the CPM rules all, then all you get are impressions — and there are all sorts of games sites can (and often do) use to boost impressions with totally worthless traffic.

Hopefully advertisers really are waking up to the pointlessness of CPM as a an ad measurement system, and really are interested in exploring true engagement. That would be a huge step forward in taking online marketing and advertising from the level its at today (which is mostly just replicating print advertising, but online) to where it belongs tomorrow: taking real advantage of the interactive nature of the medium.

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Comments on “Yes, The CPM Is Holding Back Online Advertising”

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28 Comments
Skoalrebel says:

cost this brave new world out

Perhaps it makes more sense if you consider it from their point of view — a CPM-style ad costs them $X to place and $Y to have made (employee/contractor/freelance costs), both finite amounts that can be easily budgeted. To actually engage a tech audience interactively (however more effective it would be) would be an ongoing expense, utilizing at least one person doing a job that didn’t exist before, say, 2000. You can see how that would be a big step into the unknown, and unconducive to ass-covering vis a vis the higher-ups. (Hard to create metrics for goodwill, which has long been a problem in the traditional ad business. Much easier to say “this TV ad buy will guarantee every child in America will see your ad three times”.)

Also, not all products are a good fit for this new kind of advertising/PR. Most people buy only one, perhaps two houses in a lifetime — do they need an ongoing relationship with a realtor or house-builder that could be facilitated by some kind of web community? What brand of water heater do you have? Would you spend time reading, eg, a blog for a water heater manufacturer if you didn’t immediately need, or anticipate needing one?

TW (profile) says:

Stuck in the stone age

Mike, you are right on the money. CPM is a remnant of old-school offline marketing (newspapers, magazines, TV, radio) where it was very difficult to measure much of anything other than how many consumers “saw” your ad. Marketers and ad agencies needed some kind of metric to show what they were accomplishing for their clients, so measuring views or impressions and comparing that to the cost to generate them became the industry standard measurement. But, with the advent of the internet, marketers were actually able to close the loop and measure an advertising initiative’s effectiveness at not only being seen, but also acted upon. The next baby step up is CPC (cost per click) which at least requires a consumer to click on an ad. But, even better is being able to tie it to a more involved action, such as completing a sale. But, many companies remain stuck on CPM as the ultimate measure. As senior management at both ad agencies and other companies includes more and more internet savvy people, we should hopefully see a shift toward more effective advertising metrics.

Your Ads Are Google AdSense says:

Your ads are Google's Ads

With the amount of Google AdSense ads on your page here, it would seem that no one is really willing to pay you for banners anyway. So you hope visitors like me click on a Google text link so you can get your $0.80 cents worth from them on a monthly or even quarterly basis.

Google had it right… serve up billions of impressions for FREE and get paid only when someone clicks. (although we all know there are ways to juke that system too)

Mike Masnick (profile) says:

Re: Your ads are Google's Ads

With the amount of Google AdSense ads on your page here, it would seem that no one is really willing to pay you for banners anyway.

Heh. That’s not even close to true. Google Adsense represent less than 10% of our ad revenue. Our banner ad inventory is actually sold out right now. People buy. We just wish they’d go with the Insight Community instead — because they would get a lot more value for it.

But we’re not going to turn down companies who just want banner ads. We just know that most of you will ignore them.

So you hope visitors like me click on a Google text link so you can get your $0.80 cents worth from them on a monthly or even quarterly basis.

No, we don’t care. We figure almost no one clicks, but it’s been an interesting learning experience to see how Google AdSense works.

senshikaze says:

Re: Re: Your ads are Google's Ads

what are your feeling on adblock plus? (yes i am senshikaze from above, just too lazy to log in 🙂 )
I don’t see the majority of 3rd party ads on most pages on the net, so cpm and other metrics completely leave me out. I am interested in your insight deal, though, and may even try to participate, if for no other reason than it is “different” than the traditional approach to ads.

senshikaze says:

Re: Re: Re:2 Your ads are Google's Ads

alot of websites have the ability to tell if you have adblock running. some(very few that i have found, thankfully) even make it impossible to use their site as long as adblock is enabled. That kind of thing bugs me. I mean I wasn’t going to look at the ads anyway and now i am not even going to go to the site at all. how does that the people with the ads and the advertisers? Kind of a bonehead move in my opinion.

Nathania Johnson (profile) says:

While CPM doesn’t generate as much value in direct conversions as things like paid search or even earned media, it certainly still has value. There’s pretty clear evidence that display ads drive people to search, for example. At that point, search engine optimization or paid search kicks in.

CPM should remain a low-cost option until/unless (better) measurements show greater viability. But the best online marketers are going holistic. They’re creating coordinated campaigns involving search, social media, display, engagement, digital PR, etc. It’s not about one or the other. It’s about optimizing each medium for maximum benefit.

EH says:

Insight Community and CPM

how to calculate the CPM value of an Insight Community case. They ask how many impressions it will get.

I can sort of understand that – if I were looking to advertise, and had little knowledge of Techdirt, I would want to make sure that more than like 3 people were going to look at it, and would probably ask the question using the language I was used to dealing with when talking about advertising – CPM.

Derek Kerton (profile) says:

Re: Re: Insight Community and CPM

Are you one of the people who thinks a “good consulting and analysis” needs to be put into landscape format PPT, have a 4×4 matrix, and backed by a name like McKinsey or PWC?

Yeah, then I guess I can see how the TIC just looks like so much rambling to you. Enjoy paying $600/hr/person for the formatting.

Rob Leathern (user link) says:

CPM advertising - we need more performance models

I wrote a blog post about this:
http://www.cpmadvisors.com/2009/10/16/cpm-cpa-hybrid-performance/

We really need better hybrid performance models in the online ad space. And no, CPC is not it because it can be gamed too easily. I think as you say as a publisher you guys are giving advice to the advertiser on how they can be successful on your site and for that you should be applauded. the revenue model for advertising should also reflect and benefit from both the advertiser and the publisher working together to figure out the best ways/places in which to place ads and make them work.

TB Ann says:

CPM Network

Firstly that’s a great article. Thanks for such useful information. I just recently started off with a website with my friends. I needed some help to optimize my revenue. As we’ve just started off, I know that the income is going to be really low. But all I wanted to know what are the good practices or ways to optimize the CPM ads on my website. I wanted to know things like:1) What category of website earns the most out of a CPM ad agency? 2) How many ads per page gives the best outcome? Is it best to have 1 ad per page from 1 ad agency or many ads per page from the same ad agency? Or is it better to have 1 ad from 1 ad agency and work with many ad agencies like that? 3)What size of banner makes the most money? Also, what are the best possible placements of ads on a page? 4)Usually which country’s traffic fetches maximum earnings?

I’ll be extremely grateful to receive a reply to this. This will help me a lot.

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