Guess I’m not posting as often as I promised, but now that I’ve resolved all the technical issues, I hope things will pick up.
In the online marketing arena, what strikes me as very unsettling, I find media owners and publishers seem to consistently overvalue their inventory. Let’s recap on what we have seen over the past 5 years:
Previously flat-rate sponsorships were all the rage - you could not buy on a CPC or CPM. Unfortunately, sponsorships never guaranteed traffic and were volatile at am impression level, to say the least.
Effect: Advertisers stopped purchasing sponsorships and that market collapsed.
Advertisers started purchasing on a CPM (Cost Per Thousand Impressions) and to this day, some still do. To gauge how the market has dropped, I recall being offered inventory 3 years ago at $150-$200 CPM by some silly UK publishers (no names mentioned). Again, an impression does not guarantee a click-through to the advertisers’s website - no click - no customer!
Effect: Advertisers stopped purchasing CPM inventory (in fact the market has declined by up to 80% according to some market research companies).
***EXCEPTION CLAUSE*** In countries like South Africa, where there is low Internet penetration, large corporates with dumb money (”branding” - no direct ROI measurable) seem to be willing to spend money on a CPM basis and line the pockets of the few big media owners which seem to dominate the online space, only because it’s not profitable for more competitors to enter. This is bound to change as soon as South African companies start understanding the revolution of online marketing from an international standpoint.
Cost Per Click (CPC) inventory is all the rage at the moment. Why? Well, firstly it means that the advertiser is only paying when someone visits their website. This is 2 steps closer to performance marketing than sponsorships. The risk of the click converting then rests on the advertiser. Advertisers need to ensure that their websites convert Clicks2Customers in the most cost effective way. There are obviously other concerns like click fraud or poor traffic, but that lesson is for another day.
Effect: Advertisers are focusing on ensuring that clicks they pay for are converted into customers. The higher the conversion rate, the more inventory they can affort to purchase, especially in auction based CPC media buys such as Google Adwords, Overture & FindWhat.
What’s next? Media owners are becoming more favourable to displaying ads on an affiliate basis. Remember that if your traffic converts into customers, there is no reason why you wouldn’t want to take a bit of risk. Networks such as TrafficSynergy and CJ facilitates this type of relationship - otherwise known as performance marketing. Overture has already moved to a Cost Per Lead basis to capitalise on the fact that advertisers are willing to pay more for a lead than a click.
I will be speaking at CJU in Santa Barbara, CA next week, if anyone would like to meet up, please drop me a note and let’s arrange something.
I had dinner at another fine restuarant in Cape Town last weekend, Five Flies. If you ever get a chance to visit it, you will be more than pleasantly surprise. I had my favourite meal there, a seafood platter, with langoustines, prawns and crayfish.
In addition, I finally received my order from Amazon for CSI Season 2 & 3! Looking forward to lots of CSI on the plane - for those of you that are not aware, it’s about 28 hours travelling from Cape Town to Santa Barbara!
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