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Killing Ourselves with Advertising Efficiency

Written by Andy Kowl on Tuesday, 24 May 2011. Posted in Independent Publishers

Originally appeared in Publishing Executive

If the value of your product was about to drop by a factor of 20x-50x – with no corresponding drop in demand – could you stop it from happening?

We B2B publishers must consider this question after watching B2C ad values drop to dirt in the name of "advertising efficiency."

I remember when the CPMs of consumer titles, long before we thought to call them B2C, could exceed $200. When I published Polo, at the time official pub of the U.S. Polo Assoc. with reader income north of $450K (in 80's dollars), Rolls Royce, Dom Perignon and DeBeers were buying double-trucks with CPMs too high to measure.

Recently I've had "wholesale buyers" tell me that for "good" B2C websites they might pay as much as 80¢/M. That may even be generous when you consider the alternative is running 99% of your ads free, and getting paid for 1% of them when someone clicks.

Going by true, street ad rates, online B2B publishers are like islands of value in a draining sea. Most of those I speak with every day are getting CPMs closer to $100 than the $1 some B2C sites covet. Of course the ads may not all be sold on a strict dollar-per-impression basis, but the pricing differential is glaring. Why would we think B2B is safe from the devaluation of advertising? On the contrary, those prices make us a target.

Can you think of any other price—anything—which has imploded as drastically as B2C advertising rates, dropping from $100-$200 to less than $3 in two decades? I'm not suggesting advertisers go back to paying inefficient rates for undefined results. Still, that's one helluva hit. Just today I was offered a campaign at 10¢/M – that's $100 per million!

Can B2B publishers save themselves from the same fate? I think so, but not if we don't start planning now – as an industry. No matter how brilliantly strategic your own company may be, once the bottom falls out of industry rates, yours have only one direction to go.

You can't really fault our B2C cousins. Who could have seen it coming the first time? After Y2K the internet bubble had just collapsed and the survivors were trying to find solid ground. The parallel growth of ad networks, data exchanges and internet market-measurement mavens like comScore sounded promising, even exciting. Everyone was determined to get the business model right this time, not like those crazy 90's.

The stage was set for that Siren called "advertising efficiency." It sounded great; who could be against that? How did everyone miss that advertising efficiency = less money for publishers? Not lower overhead, just lower revenue. How did the B2C publishers not stand up at some point and say, "What we do has value beyond clicks!"

Our B2B islands of high-value advertising are starting to erode. Now is the time to start eyeing each new "advertising technology" announcement carefully. Remember the B2C cautionary tale and beware embracing new technology for technology's sake.

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About the Author

Andy Kowl

A journalist and entrepreneurial publisher with more than 25 years developing, marketing and growing publications, events and information products. I could not be more excited about spearheading Next-Tech Markets Advertising Co-op. Dozens of publishers are coming together to increase our ad sales and protect our brands. We believe quality content, professionally written and edited, is what protects the internet from becoming just so much fluff.

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