I’ve never been a huge fan of CPM online ads. I bought my first CPM ads in 1996. We tracked the bejeezus out of the sales funnel (mostly by hand via server logs – there weren’t a ton of automated tools back then that we could afford) and the ad sales folks did not love us for it.
It was clear to me back then that CPM pricing strategy on the sell side was something akin to a “wet finger in the wind” process. We’d go back to sites after our first buy and say “Hey – our average CPGA is X and via your site it’s 2X – so we’ll do another buy but at a third the price and see what happens.” Of course they always said “Uh, sure, okay” since they never had a means to push back on actual data.
I’m not convinced that CPM sales pricing is all that much more rational now. Nearly twelve years after my first CPM experiences, TrustPlus looked at a focused campaign in the dating space: net-net, the CPM was exceptionally high, and the projected CPGA numbers were, effectively, irrational.
JP Morgan released their 2008 Nothing But Net report a few weeks ago. In it, they do some interesting math on the online ad space. The chart that really struck me was:
It’s a standard long-tail curve, but if you work the math out, it shows that the average CPM is still $1 or so – maybe even less. Given the size of the online ad market, that’s a whole lot of pocket change rattling around!