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CPM vs. anything else
why doesn't web advertising follow the TV model?
TaTonka




msg:552906
 5:29 am on Mar 13, 2001 (gmt 0)

Hello, everybody, I'm new in WmW but have been online for ages and found this great forum a while ago.

Now that I have started my software development company and we put up a website I have found out that the CPM model that was touted a year ago as the 7th wonder of the world is no more. At least not through the banner or affiliate networks. All I see are CPC or pay-per-lead models, unless your site is upwards of 250,000 impressions/month. And even then, CPM does not pay at the same level.

Now, of course I read the papers and I know about the plethora of sites that trusted advertising as their first support and, well, died.

Then I turn on the TV and I see a few networks whose main support comes from advertising, in a passive form. Nobody can click on a car on TV and buy it right away.

My point is: why must we webmasters be forced to use models who only reimburse for immediate purchase? In a TV ad, the mere exposure is the reward. The same should be true for Internet ads. The CPC model is only rewarding us for the user that clicks on the ad. How about the hundreds who will look at the ad and go to the site a little later? I know I have done that and read research articles that prove that exposure means traffic.

How about the pay-per-lead programs? I'm sorry, Jim... I'm a webmaster, not a salesman! If I wanted to get 7% of a $50 sale I'd go look for a job at my buddy's jewelry store, at least I can use my natural charm... ;)

So, why doesn't web advertising follow the TV model? Why do TV ads pay per exposure and web ads do not? And, more importantly, what can we do about it?

 

WebGuerrilla




msg:552907
 6:57 am on Mar 13, 2001 (gmt 0)

Hi TaTonka,

Welcome to WmW!

>>So, why doesn't web advertising follow the TV model? Why do TV ads pay per exposure and web ads do not?

Web advertising no longer follows the TV model because advertisers are no longer returning to purchase it.

For the most part, companies that advertise on TV are well established, profitable companies that can afford to spend money on a type of advertising that might not generate immediate sales. The web on the other hand, is quite different. The vast majority of companies that caused the CPM frenzy of a couple years ago, were upstart, non profitable companies who were spending their way through borrowed money. Now that all the money is gone, they've discovered that banners do very little to help bring a company to profibility.

Now that there are very few companies looking to buy banners, Webmasters are forced into performance based deals. It is the only way they can get rid of the inventory.

It's just a classic example of the laws of Supply & Demand. The only way to "fix" the problem is to come up with a way to convince people to click on the banners.

TaTonka




msg:552908
 1:52 pm on Mar 13, 2001 (gmt 0)

>>>For the most part, companies that advertise on TV are well established, profitable companies that can afford to spend money on a type of advertising that might not generate immediate sales. The web on the other hand, is quite different. The vast majority of companies that caused the CPM frenzy of a couple years ago, were upstart, non profitable companies who were spending their way through borrowed money. Now that all the money is gone, they've discovered that banners do very little to help bring a company to profibility.

Ok, that makes sense. But these companies that advertise on TV, don't they also advertise online?

How much more expensive is it to do a wide Net campaign compared to a wide TV campaign?

rcjordan




msg:552909
 2:25 pm on Mar 13, 2001 (gmt 0)

>Ok, that makes sense. But these companies that advertise on TV, don't they also advertise online?

For the most part, no. Most of the brick-&-mortar crowd were skeptical and held back. IMO, most that have ventured online have gone for the more "safe and sure" route of affiliate and/or CPA deals.

That said, just yesterday I came upon a newswire page that had "Budweiser" as the background image. Obviously, Bud sees the value of branding (even near-subliminal branding).

bigjohnt




msg:552910
 4:33 pm on Mar 13, 2001 (gmt 0)

RC has a good handle on this.
In addition, the web IMHO is a "pull" marketing vehicle, rather than "push" as in conventional broadcast/print. People already know what they want, and are searching for it. The value of random, or even targeted images and banners is even less effective on the web than when in a passive venue like sitting on the couch surfing tv channels.
In the well established formula of marketing 101 (AIDA - Awareness-Interest-Desire-Action), the majority of purchasers on the net are already at "Action" and know what they are looking for. I sincerely doubt there are many (if any) users surfing around, thinking, "Gee, what should I buy today?" Again, IMHO, the web is a terrible place to start building "Awareness" unless you have a huge budget that is better spent offline, driving traffic directly to your site. The online model is upside down from the rest of the advertising world, and this is part of the reason that advertising agencies and major dotcoms are doing such a bad job with it. Agencies typically are paid a percentage of what services and impressions are purchased on behalf of the client. Buying millions of dollars of useless banners makes more economic sense to them than using PPC models, which produce less revenue for the agency, and more sales for the client.
Savvy advertisers and marketing people understand the above. Personally, I would spend nearly all of my money on PPC, which is merely the web interpretation of CPI or Cost Per Inquiry in the conventional ad world.

rcjordan




msg:552911
 5:51 pm on Mar 13, 2001 (gmt 0)

>majority of purchasers on the net are already at "Action" and know what they are looking for.

That's a very important point. IF you manage to somehow get your ad in front of them when it relates to their search even 'traditional' 468x60 top banners can do an incredible job.

FWIW, for the past 3 or 4 years I've struggled to learn the banner business and establish rate cards for my own direct ad sales. Early on I began to guage web advertising's cost against those of direct mail marketing. It seems to work out very well in establishing a price point.

WebGuerrilla




msg:552912
 6:25 pm on Mar 13, 2001 (gmt 0)

>>IF you manage to somehow get your ad in front of them when it relates to their search even 'traditional' 468x60 top banners can do an incredible job.

This is so true. If the ad is tied to a search and the ad is at least a good of a match to the search as the regular listings, the click thru rate will increase dramaticly.

Sites that can sell banners connected to search results, or specific content pages, and then supplement the banner with something like an inhanced directory listing featured at the top of the page, can still do well.

These are the only type of impression based advertising I will even consider for a client. It certainly takes a bit longer to find the right niche site that offers these type of programs, but the results are much better that what you get using a traditional network.

rcjordan




msg:552913
 7:10 pm on Mar 13, 2001 (gmt 0)

>Sites that can sell banners connected to search results, or specific content pages, and then supplement the banner with something like an inhanced directory listing featured at the top of the page, can still do well.

In my case, the directory is called the "Sponsors Gallery" and that is heavily cross-linked throughout my sites. The sponsors are ranked (currently 5/page) according to their contribution to the site (some contribute considerable 'name-brand' content, some just pay) get more text area around their graphic. Though it's an entirely subjective observation on my part, I am sure that those that elect to fly a 468 banner along with their listing in the directory receive an extra boost in the CTR. I think it's a form of short-term branding.

>specific content pages

I sell non-rotating buttons on key content pages. The number of impressions can be enormous, and so can the CTR -low teens is not out of the question, and I've seen spikes as high as 25%.

gmiller




msg:552914
 1:05 am on Mar 14, 2001 (gmt 0)

There are some problems I haven't seen mentioned in this thread:

(1) The supply of ad space on the web is nearly infinite, allowing advertisers to force all of the risk onto the web publishers. That's good for advertisers, but terrible for anyone trying to support himself on ad sales.

(2) It's not just the web that's suffering. Ad sales aren't good on TV, and print businesses are approaching full panic mode.

rcjordan




msg:552915
 1:48 am on Mar 14, 2001 (gmt 0)

>not just the web that's suffering

True, VERY true, and I think we lose sight of that as we circle the wagons around web advertising. This sums it up pretty well... SCRIPPS REVISES EARNINGS PROJECTION -Most Advertising Sectors Are Down [mediainfo.com]
Scripps operates 21 daily newspapers, 10 broadcast TV stations, and three national television networks, with plans to launch a fourth. It also operates Scripps Howard News Service, United Media (licensing and syndication), and 31 Web sites.

Newspaper advertising revenues were down 1.9% in February. Classified advertising revenue for February was down 3.3% and local advertising revenue declined 4.1%....

At the company's broadcast television stations, February revenues declined 14%.


mivox




msg:552916
 3:01 am on Mar 14, 2001 (gmt 0)

A comment I made elsewhere:

"I'm getting tired of the press going nutso over any hiccup in the internet sector. First, it was everyone's quick-n-easy path to fame, riches and glory, and now it's an apocalyptic disaster waiting to happen."

Yahoo still sounds like an unusually solid, well run business by internet standards, but they get hit by an ad slump, and suddenly the virtual sky is falling... their stock gets shut down, and drops once trading resumes. Did people dump their newpaper stock when their ad sales went down? I doubt it.

If a business can survive the ad slowdown ('real world' or internet), it's not such a disaster... The real word ad models have been proven over time, so they should be OK. The internet ad models have never worked spectacularly well, so maybe some new methods/avenues are in order... and any new idea that can do well in the current advertising climate should do spectacularly once things pick back up.

sean orourke




msg:552917
 4:21 am on Mar 14, 2001 (gmt 0)

I'll second the above.

Conventional wisdom is usually outdated. When everyone is buying a stock it is usually time to sell. The same holds true with most ideas.

rcjordan




msg:552918
 4:41 am on Mar 14, 2001 (gmt 0)

mivox is right. I'm terribly frustrated over the "if-it-is-web-it-has-to-be-bad-business" mentality out there. The latest w/ Yahoo is really disturbing because it's chumming the press. Sure enough, they are screaming The End Is Near! and everyone is nodding and clucking. This, in turn, will produce another huge set-back for publishers whether their model works or not. A self-fulfilling prophecy.

TaTonka




msg:552919
 5:37 am on Mar 14, 2001 (gmt 0)

With regards to Yahoo or Amazon being dead, well, 2 years ago it was Apple and one year ago it was Netscape and they are both still here fine and dandy. The newspapers need to be sold, so it's always either the best or worst of worlds.

With regards to the AIDA model, even though I'm a lay person in marketing theory I think that by just making a self-analysis, I'm not sure that I'm always on the Action mode. The whole thing about the web is that, departing from TV, it is an active medium.

I might be checking out the news today when I see a banner about the latest Star Wars movie. I'm looking at the news, but you bet I'll click on the banner. Not because I had previously decided to buy anything related to Star Wars, but because I was suddenly aware that the product had become available. Interest and desire were already there so the jump from awareness to action is fast.

Nothing generates more awareness than the web. Netscape, ICQ, Napster, are examples of that. By the time they started going for other media, they were already really big on the Net. The thing is, it's mostly person-to-person communication, not because of banner ads. So how can banners get closer to generating more of that buzz?

Come to think of it, I wonder how many great softwares are out there that I don't know about....

bigjohnt




msg:552920
 3:04 pm on Mar 14, 2001 (gmt 0)

TaTonka, now you have me confused.
>Nothing generates more awareness than the web.
How exactly does Netscape, ICQ or Napster CREATE awareness? I now they create media attention of late, and help deliver messages as vehicles, but as far as creating awareness please explain. I do realize that wired folks rely on these and other services, and as such have been "aware" of them out of necessity.
Also, in reviewing the Banner/Star Wars example, previous to SEEING the banner, were you not Aware, Interested, and Desirous of Star Wars info in general? In order for this particular banner example to have "created" awareness for you, you would have no prior knowledge of Star Wars. I may be being a little persnickety, but you may enlighten me - I am always ready to learn.

TaTonka




msg:552921
 3:14 pm on Mar 15, 2001 (gmt 0)

Before I start, let me just say (or type...) that I learned sooooo much from this thread already. What was I doing not coming to WmW before? This has been a high-level and respectful discussion about a potentially flame-war issue. Is it always like this? I hope so. Anyway, back to the thread. Ok, bigjohn, here I come :)

>>>>TaTonka, now you have me confused.
>Nothing generates more awareness than the web.
>>>>How exactly does Netscape, ICQ or Napster CREATE awareness? I now they create media attention of late, and help deliver messages as vehicles, but as far as creating awareness please explain. I do realize that wired folks rely on these and other services, and as such have been "aware" of them out of necessity.

I was referring to how Netscape, ICQ and Napster grew to be the vehicles they are. When these programs were introduced, they did not rely on anything but the web for medium. All three of them became mainstream tools by sheer word of mouth and web presence. The softwares don't create awareness, they benefit from the "tradition" of information-sharing on the web. The medium is the awareness generator.

>>>>Also, in reviewing the Banner/Star Wars example, previous to SEEING the banner, were you not Aware, Interested, and Desirous of Star Wars info in general? In order for this particular banner example to have "created" awareness for you, you would have no prior knowledge of Star Wars. I may be being a little persnickety, but you may enlighten me - I am always ready to learn.

As I said, I'm not an expert in marketing theory, far from that, so I probably did not use those terms correctly. You're absolutely right. In the example, the fact that I was desirous about Star Wars in general makes me more likely to follow an advertising banner or link about Star Wars, no doubt about that. It was the wrong example for what I meant.

To use a better one, I can tell you about a product I actually found out about online. PDAs, the Palm Pilot thing. I read many articles about it and saw commercials online eons before I saw anything on TV or magazines. That generated my interest and desire and led to my action, also online. By the time I saw it on magazines and TV articles, I had already done my research (online) and purchased one. The web is fast and interactive, so if you're suddenly aware that a product exists that fits your need, you don't have to leave home or even get up from your chair to buy it, and making an informed buy.

The point I'm stumbling to get to is that just because some web companies that didn't have a good product to begin with, they didn't get a good result from advertising online. That does not mean a company with a solid product could not get a much better result from online ads and promotions than from traditional advertising, even for building awareness. Or does it?

rcjordan




msg:552922
 3:46 pm on Mar 15, 2001 (gmt 0)

>This has been a high-level and respectful discussion about a potentially flame-war issue. Is it always like this?

Absolutely, 3 basis rules here:
1 - Courtesy
2 - Respect (no matter what one's skill level may be)
3 - No self-promotion

bigjohnt




msg:552923
 10:10 pm on Mar 15, 2001 (gmt 0)

TaTonka,
Excellent re-explanation. Now I understand your POV.
Yes, the internet is a great vehicle for distributing impressions to sell any good or service that targets the computer savvy/gadget bearing market segment. The "early adopters" to use a marketing <cycle> segnmentation term. There exists a segment of the market that will always want the new/improved/never-before-seen electronic gadgets, doodads, wigets and whatnots. And YES, here they are, online, and ready to buy. (We sit among many of them, here in these forums, I bet!)
My conservative marketing voice says on the entire issue, when given the choice - SELL by impression, BUY by click/performance. BUT -- Closely examine margins/conversions and do the math well.

>some web companies that didn't have a good product to begin with, they didn't get a good result from advertising online. That does not mean a company with a solid product could not get a much better result from online ads and promotions than from traditional advertising, even for building awareness. Or does it?

I agree, with effective targeting, it is possible to get a good result from online advertising. And frequently overlooked by small business and large is the leverage available by integrating and working offline/online together. Hollywood gets it right. How often do you see a movie trailer or commercial WITHOUT a corresponding URL leveraging their intitial exposure. Integrated marketing communications will take the strengths of each medium, and combine them in the most powerful way. - Also, good marketing and advertising, online or off, can kill a bad product faster.
Gmiller has two very good points also. Advertising revenues in general are sliding... and My crystal ball says that advertising agencies that do not morph into more readily accountable "Direct Marketing" agencies, will continue to slide. Nowhere is this more easily tracked than online - arguably the most "direct" medium of all. One to one marketing - in the comfort of the home or office of your customer.

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