P&G wrangles to recast Web ad pricing system

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Procter & Gamble Co. is embroiled in a face-off with World Wide Web publishers that could shatter the way online advertising is bought and sold.

The nation's largest advertiser is soliciting proposals from major Web media sites to place ad banners for as many as eight brand-oriented sites.

But P&G won't make a purchase unless Web sites change their model for pricing sponsorships.

Web ads generally are sold at a cost per thousand based on impressions--every time a page with an ad banner is seen. Web CPMs at major sites generally range from $10 to $80.

But P&G wants to buy Web advertising based on how many times an ad is clicked. Under that model, the marketer would pay only when someone sees an ad on a Web page and also clicks on it to jump to a P&G site. Click rates for banner ads are as low as 2% on some sites.

DEAL WITH YAHOO

Executives said last week that Web directory service Yahoo! Corp. had agreed to sell ads on P&G's terms, opening the door for a broad shift in Web site buying and selling.

Jeff Mallett, senior VP-business operations at Yahoo, confirmed the company had struck a "multimonth" deal covering five P&G brands but declined to comment on the terms.

P&G will place banner ads throughout the service as well as participate in promotions on Yahoo's home page.

Yahoo will work with P&G to create the ad banners.

P&G already has sites up for Olean, Sunny Delight and Hugo Boss, as well as a corporate site. Tide and Cover Girl are among the next brands to launch, Web ad sales executives say.

P&G and its interactive buying agency, Grey Advertising, New York, declined to comment. But Grey executives in the past have said they believe an impression-based pricing system doesn't work for package-goods companies. If the goal on the Web is to create a one-on-one relationship with a consumer, Grey believes it isn't enough to know only that an ad was seen.

Web publishers, on the other hand, say pricing ads on a "cost per click" renders the surrounding editorial content worthless.

"They're doing the equivalent of asking a television station to run ads free and then paying for the ads that work," said Bill Townsend, VP-advertising at Web search engine Lycos. P&G is "basically saying that anybody who sees an ad and doesn't click on it doesn't mean a darn."

BUSINESS AS USUAL

P&G watchers say playing hard ball is nothing new for the company, among the toughest ad negotiators in other media.

"That P&G is trying to knock down the rate card is standard operating procedure for them," said Jim Van Cleave, former VP-media and programming at the marketer and now head of his own consultancy, Cincinnati Strategies. Grey is known to have approached nearly every large Web publishing entity and search engine to solicit proposals.

"We all want to create a pricing system that is a fair reflection of the value of the media," said Bruce Judson, general manager of Time Inc. New Media, home of the Pathfinder Web site. "What is accepted today is almost certainly different from what will be accepted six months from now."

P&G's tactics bring to the forefront a debate that has been bubbling underneath the surface for months: How should an ad on a Web site be priced? And whose responsibility is it to make sure an ad is seen--the agency and advertiser, or the site itself?

MORE CREATIVE CONTROL

Media sites say they'd be willing to charge on a click-through basis only if they get some creative control over the ad banner and if they get paid a premium CPM--something P&G is reportedly unwilling to do.

"We are not going to offer them a cost per click because we can't figure out a way to make it make sense to us," said one Web ad sales executive who has met with P&G. "If the media's responsibility is to deliver audience, then we have to have a lot more creative control."

Those on the other side of the equation say accountability and audience delivery are exactly the point.

"Impressions often have very little to do with click-through performance," said Tig Tillinghast, assistant director of J. Walter Thompson/i.e, San Francisco.

The agency will regularly make buys for clients based on impressions, he said. But when it comes time to measure the ad's performance, click rate is a prime factor.

"The whole reason we say we want to be on the Net is we want to get away from mass impressions," said Anthony Manson, senior VP-group director of Y&R New Technologies, New York. "That's what banner ads do."

Contributing: Chuck Ross.

Copyright April 1996 Crain Communications Inc.

What do you think of P&G's plan? Should Web ads be priced on a per-click basis, or are Web publishers right in setting pricing based on impressions? Or is there some other terminology we ought to use? Share your thoughts on the Digital Media discussion board.

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