Marketing Brainstorms, trickles and drizzles

Fundamental Law of Economics v1.0

Yeah! Let's just stop selling our placements at low prices! How about if we just hire Henry Paulson and nationalize online display ad sales and then get Barney Frank and Chris Dodd to regulate them so that we can remove the riff-raff sellers from the process!

Or, its possible that online display ads are following the natural course of economics - namely that the price of a good (in a relatively free market) tends towards its incremental cost of delivery. For a "premium" publisher (read lots of fixed monthly investments in infrastructure like content, web service, sales, billing/receiving, management, etc), that incremental cost tends to be higher - so the price has to be higher. But, in the ocean of supply from the long tail (alexa rank less than 2,000 say) - the incremental price keeps going down until you get, mostly, to just the cost of electronic delivery of bits to your browser. And I guess that's around $0.23 or so.

I think the music business is also struggling with this concept too.

One more P.S. - Display ad market contracting?

More expert analysis, of course now we're getting into November, it was October then and July before that.

Listening to today

The War on Drugs

Admanager 300 EA Sellnet

CPMs are dead, long live CPMs

Someone forwarded this post to me, which, in turn, was reflection on this.

Ok, ok - no question that marketers interested in demand generation are flailing a bit with the media - but I think the reasons have only longer-term solutions. And both Jitendra and Dave seem to be part of the new generation that understands and is talking about how to start the process.

But is the rate card really the problem? Marketers- whether generating demand or fulfilling it - are basically interested in reaching their (potential or exsiting) customers with advertising (v2.0 or higher notwithstanding). And to someone doing that, either by improving the quality of the supply or offering new types or something else, they'll pay - CPM, CPC, CPA, CPZ, AAA, OMG, whatever - they'll pay.

Post Script Edit - Recent article on ad clutter

Has the following quote

>>>>

Last year, a study conducted with Dynamic Logic, Starcom and DoubleClick found that a 15% increase in ads on a page results in about a 10% decline in click-through rate.

<<<<<<

Listen, if one of the top marketing trade magazines positions the advantage of lower ad clutter as higher CTR, I can probably guess where the vast majority of established marketing minds are focused relative to measuring success of online media advertising - and its not in new demand generation models that leverage conversations. My point again is that a little maturing should fix the problem.

P.P.S. Online Display ad growth slowing?

Well, now that the experts say it... must be true. Of course, its October now and it was July then

Small is the new Big

Again, more context to my post about how one great opportunity emerging is automating the process for small, long tail advertisers to make display ad creative at no or low costs. He doesn't say that but he illuminates two aspects - one is that Google is the essence of long-tail economics (small advertisers make up much of the online search market) and two is that there is "incredible disruption and innovation going on" in that long-tail advertising market.

Average eCPM of $0.23 at AdBrite

Reading this article I ran the following numbers

384 million daily impresssions results in a projection of about 11.5 billion monthly impressions across 83,000 sites.

Flat 08 revenue over 07 means about $32 million in revenue - this is my guess.

So that means, on average, their performance network is generating about $32 monthly revenue per site at an average eCPM of $0.23. I would guess this means world-wide.

If you believe Alexa and attribute 25% of their traffic to US and guess that 75% of their revenue is US, then the number becomes an eCPM of $0.69 on 2.9 billion monthly ad impressions. 

And another thing

This article reminded that I haven't talked about this at all on the blog - although I've bored quite a few people in person with my pov. In case you're interested in reading more - here's another of the same.

The questions are "Why hasn't Google dominated the display ad business the way they dominate the search ad business?" and "Now that they own Doubleclick - are they going to?" (yes, I specialize in ending sentences with prepositions because my ninth grade writing teacher (Ms. Ashcraft from Alabama) told me never to).

I mean, you can run a display ad through the AdSense network just as easily as keywords. So, I guess there could be a couple of explanations

    1. Contextual targeting doesn't work as well on display ads as it does for keywords. In other words, somehow advertisers don't do a good job of assigning keywords associated with their creative so that when Google matches it with page content, its not a good fit (or not as good as just plain keywords). While I may seem cynical (I'm like those voters who ask hard questions at town hall meetings - being told I'm cynical because I ask a hard question - I'm like "I'm not cynical - I just would like you to answer the question"), I really believe there are smart people testing digital media and I think its not that hard to match some keywords with a display creative - worst case, you'd just reuse the same set of keywords you're buying. So, I don't think this is a reasonable explanation.

    2. Its more profitable for Google to always default to showing keywords-in-a-bunch (or whatever they call that technique of piling a bunch of sponsored results into a 160x600 pixel frame). Seems like the market would adjust pricing for this - in other words, it would be more expensive to buy a click using a display ad rather than as a text ad.

But is there really a limited supply of these ad impressions? My perception is quite the opposite (which is why there really is no such thing as frequency capping on Google - I can get the same pile of Google Adsense keywords in a placement on the page over and over and over and over ... - well you get the idea) - there are more impresssions that could be filled if there were display ads to show in Adsense.

It could also be that advertisers aren't tapped out buying keywords and the growth of search might indicate this. My limited exposure says that within an individual advertiser using SEM, there is a ceiling of traffic you can achieve with buying keywords - both in terms of number of keywords and pricing and you get there pretty quickly. After that its all optimizing the yield - getting another 10% uniques for 10% less cost. Of course, advertisers might be finding they don't get any additional lift (more leads/sales/customers) by spending more for a display ad click via AdSense or that other channels (like Yahoo or Ask.com) are more effective for their incremental SEM budget.

But combining Covario's assertion that average search CPC for their customers in Q3 '08 was $1.09 with Pubmatic's recent assertion that the average eCPM for network sales of display space was $0.27 (see yesterday's post) - a CTR of 0.025% is all that's needed to make display economically equivalent to search. So, this is plausible (just call me the online advertising Myth Buster) but its hard to make the numbers work.

    3. So what is it? How about the cost of the creative itself? Google's business really is the essence of long tail economics. They haven't really taken money from the biggest advertisers so much as from lots and lots of smaller advertisers. Look, I've been inside a company that spent annualized $2.4 million on SEM and we ended up on a couple of top 10 lists for search advertisers. I even got a free fridge with the Google logo on it from the company.

But, Google's total US search revenue is in the $9 to $10 billion range annually - they would have to have 4,000 companies spending an average of $2.4million annually to get to that number - so how did we get to be in the top 10? Because Google has maybe millions (certainly hundreds of thousands) of advertiser spending a lot less per year. And how do they do that? Remove the friction to getting online - automate the process to signup and buy - and provide a value proposition that combines PPC with contextual targeting.

But none of this is a barrier to running display ads through the Adsense network. Same friction removal, same value propostion. Except for one thing - imagine you are an advertiser spending $10,000 annually on Google - what's easier to make - keywords or a display ad? Um, well, keywords require some literacy and intelligence but making a display ad? That might cost another 10% to 15% of your total annual marketing budget - and that's assuming you don't make many changes to the creative during the year.

So, the great new opportunity is to help automate the process for small, long tail advertisers to make display ad creative at no or low costs.

Wow - that took a long time for me to say. Now, you know why when telling this, over lunch, my lunchmates generally end up face first in their pasta.

Listening to today

The Shaky Hands and Kings of Leon. I also think this is pretty cool

Display CPMs down 21% in Q3 (from Q2!)

Here it is in black and white. Key takeaway is that Q3 08's average ad price for display ads sold through networks (remnant) is $0.27 - down 21% from Q2 08's price of $0.34. No clue whether this is recession pullback on the demand side or seemingly never-ending increase on the supply side. Like Forrest Gump says about whether life is destined or a chaotic chance - its probably a little of both.