Media Marketing Guide 2010

Your Media Questions Answered: Digital

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Edmund Lee
Edmund Lee
With its infinite supply of impressions, what's the trend on pricing for online advertising?

In a recent tally, ComScore reported the average cost per thousand impressions (or CPM) for the internet hovered around $2.43. That figure has trended up slightly, but not significantly higher, the measurement company recently said. In fact, the average prices for CPMs have not shifted dramatically in a while. The reason for this is there's a glut of online ad inventory, which effectively makes it a commodity. And as any futures trader will tell you, commodity pricing is almost entirely a function of supply and demand.

Sites from Yahoo to AOL to Gawker are experimenting with using larger ads.
Sites from Yahoo to AOL to Gawker are experimenting with using larger ads.

Online, the costs of buying media generally go up the smaller you slice-and-dice an audience. So odds are marketers who want to only reach women 18-34, who live in urban areas and are interested in "green" products, are likely to pay more than a broad-based general-audience buy -- but a more targeted buy is likely to yield better results, meaning higher click-throughs, sign-ups and conversions. The key to online ad buying is optimizing what you get for what you pay.

In general, any successful digital strategy today requires as much on-the-spot strategizing as advanced planning. The most-effective way to manage a campaign is often to mercilessly mark every moment of its run, to see what works and what doesn't and alter course accordingly, in real-time. And so, despite trends in CPMs, the real cost is often time and human capital.

Is there any action in online creative or ad-unit sizes?

Yahoo and AOL, two of the largest online properties, have begun to unveil larger and larger ad units that are custom to their sites. Meanwhile, the Interactive Advertising Bureau has also been working on sanctioning larger units. These moves signal the emerging importance of capitalizing on and promulgating the internet's capacity as an entertainment medium beyond two-minute YouTube clips.

Gawker Media recently began experimenting with close to full-page ad units, and Yahoo's login page for its email service, one of the most highest-trafficked pages online, now sports a full page that would be a premium placement for any marketer.

According to Yahoo, these full-page units are measured as much for their click-through or "engagement" rate as they are for effectiveness in promoting a brand to offline actions, such as watching a TV show or even buying a car. One of the more-specific motivations for this trend clearly is to bring internet advertising as close to both magazine and TV analogues as much as possible. Larger units walk and talk like a full page, four-color magazine placement. And in some cases, the emergence of richer units that include multimedia can feel more like TV.

What about on sites like Twitter and Facebook?

At the other end of the spectrum, social networks, specifically Twitter and Facebook, have gone smaller in size. Twitter, by the very nature of its service, has to be small, and in many ways fulfills a different function in the ecosystem of online advertising. A promoted tweet on Twitter, for example, may very well lead to a landing page that is effectively a full-page ad. Facebook, on the other hand, is already a destination, but the company has cleverly maintained the site's relatively clean look and feel with small ad units that aren't too intrusive, lest they offend their mammoth membership on which they depend for everything.

Overall, it's either going very big or very small. The banner will not go away -- it has become part of the regular vocabulary of digital marketing -- but it is becoming a lower-rent unit.

What's happening between publishers and ad networks?

For as long as online ad networks have been in existence, publishers have grudgingly accepted their terms. Why? Publishers typically face two issues with regard to selling online ads: 1) They aren't built out to efficiently sell all of their inventory, meaning they often don't have the technology for real-time bidding or the ability to target its audience according to specific segments. And 2) They don't often have the scale to sell to a big media buyer. Ad networks solve both problems by providing scale and targeting at cheap prices.

But what is an ad network but a collection of publishers, big and small? The two entities, therefore, work in a strange symbiosis. But that may soon be changing. As some of the bigger publishers become smarter and more technologically savvy, they will eschew ad networks in favor of semi-private consortiums of publishers, which would allow them to offer them both scale and technology.

When this happens, prices are certain to go up, but the larger promise behind such a scheme isn't simply to get more money from advertisers (though that is ostensibly the goal), but to offer advertisers better branding as well as better performance. In the end, even if publishers are charging more than what a network may offer, advertisers may not end up paying more if they're buying only for performance.

Edmund Lee covers digital for Ad Age.
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