The value of online advertising

Update:I re-read Scott’s post and think I may have mis-interpreted it. I think he is saying the flaw is in the way the ads are sold, not online advertising itself, to which I agree. (Could be the Black and Tans. I’m Italian, but my mom says we are all Irish on St. Patrick’s, so I have a Guiness and some Corned Beef to celebrate too.)

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I’m usually on the same page as Scott Karp, but not today.

Maybe it’s because I’m snowed in and it’s St.Patrick’s (Black and Tans), but what he calls a flaw of online adverting, I call a fix to a flaw of traditional advertising.

First of all, it’s not only Yahoo and the big boys getting premium rates for page views. As the producer of a couple local newspaper websites, I can say that our page-views are worth much more than $1 per a thousand.

It’s true that national advertiser can sometimes get that CPM, but it more like $4 to $18 per CPM and that doesn’t include the text ads we have on the page. Nor does it take into account that each page-view serves 2- 4 display ad impressions. And some pages are sponsored also.

All in all, I’d estimate that our cost per reach is lower than our in-print advertiser cost per reach, but not that much lower.

The fact is, I don’t think either rate is as valuable as the cost, so we are in agreement that pay-per-click is bringing down the the total value of a page view.

But that’s exactly what we want, as an industry. Wha?

Like Scott says, it’s about knowing who your users are. The value of an ad is in what value it delivers to the advertiser, not in what perceived value any salesperson can convince the advertiser that a particular buy has.

And, like I’m sure Scott knows, the internet is best at bringing the margin between cost and value together, to zero in some cases.

It’s not a flaw, it’s a virtue.

I guess that means that high traffic does not equal a business model. Popularity is not enough, though huge popularity is still enough for the time being.

I think that’s just because we are in the huge transition. We now value things by the old model, “perceived and estimated value.” We soon will value them by the new model, “true value.”

That’s where Doc’s VRM will play a large role, as well as gestures and intention.

I see VC’s as the ones placing faith in page-views, moreso than web 2.0 companies. Most Alot of them are aiming right, I think.

Who can’t resist the allure of high traffic, though.

Pageviews aren’t dead, it’s CPM that’s dead, and VRM is born

A lot of talk lately about how page-views are dead.

Greg Yardley suggests a solution but it looks like he’s missing an important point.
It’s not just about widgets and “share” of the page, it’s the fact that a well-built Ajax application may now substitute a rich interface for what was tens or hundreds of page requests.

So now how do you calculate a CPM? By the number of clicks on a page? (I guess Ajax will report this data back to the server)

Are advertisers going to buy into the fact that a click that delivers new data to the page makes their ad on that page worth two impressions? Doubtful.

Do we need advertising engines that deliver ads in time based or action-based way so that one HTTP request can deliver more than one ad if the user is interacting with the page for an extended period? Maybe.

Or do we need to rethink advertising in general and admit that interruption based advertising is dead in general? I’d say so.

Which is why pay-per-click is so popular and why pay-per-action will continue to grow. No doubt.

By the way, it’s not just Ajax that’s causing this death of the page-view. It’s widgets, as Greg suggests, and RSS, and syndication of other sorts that make modern web marketing almost impossible to track effectively.

What can be tracked, as always, is the effectiveness of a campaign ROI, which methods like pay-per-action help immensely.

So what’s left to do in a pay-per-action world? Attention, Gestures and Intention are the gold that needs to be mined in order to create more effective marketing.

Using that gold will help us direct relevant offers to willing individuals. What could be better than that?

We can’t do it alone. CPM is one-way marketing, and one-way is dead in all things web.

That’s where VRM comes along. It stands for Vendor Relationship Management, and it refers to a new generation of tools on the way that allow the customers to assist in the marketing relationship.

Some will resist this loss of control at first, because what’s better for the customer doesn’t seem to equate to better for the vendor. But that’s wrong because the marketplace is not an equation, it’s a relationship.

A marriage doesn’t only get better for one of the spouses as the relationship grows stronger. It gets better for both.

Page views aren’t so dead as CPM is. Long live VRM.