Scale Clouds Quality Online

We Online Business People pray to the gods of scale. Does it scale? Do you have scale? I read an article in the trades recently quoting someone that said about a deal “now we have scale” triumphantly.

Scale matters in advertising. If you do something that works you want to know you can do more of it. If you invest time and effort into a project you want to have the reach to have this effort move your business.

Scale matters. But influence often comes from composition rather than reach.

Chris Anderson comments on some data from PubMatic that shows the long tail is able to charge more than the head. The value, Anderson argues in this multi-year focus on the long tail, comes where the scale isn’t. Put another way, there is more value and potential influence with more focused, smaller areas of the web.

Then comes the data on average CPMs across a sampling of 1000s of websites (click to enlarge image)

2 thoughts:

1. Those are wickedly low CPMS. Even the markedly higher “small” websites (less than 1,000,000 page views a month) are averaging $1.29 per 1000 impressions!

2. Scale and quality do not have to be separated but the filter of quality will always create a smaller offering. It would seem that the industry excitement with scale is creating an environment where impressions are, as Wenda Harris Millard once said, traded like pork-bellies.

Scott Karp: Why is the NYT print CPM $144 while TechCrunch is $15-40?

Scott Karp has an interesting post on Local/National Advertising in Newspapers here. In it, he writes:

If you do the math, the cost of 1 page, or 126 column inches at the National Weekday rate of $1,233 is $155,358, to reach 1,077,256 weekday subscribers. That works out to a cost per thousand (CPM) of $144.

Compare that to the $15-40 CPMs that TechCrunch gets for displays. Imagine what TechCrunch’s business would look like if it could command $144 CPMs.

So given that the New York Times can charge 3-4 times as much to show me a technology-related ad in print than TechCrunch can charge online, is it any wonder that they are trying to convert me to a print subscriber?

My thoughts:

- Using the open rate card for the NY Times is just wrong. Very few, if any, advertisers pay open rate no matter what NY Times might say. That said, I doubt there are many full pages in the NYT going for a $40 cpm…

- Most websites have more than 1 ad on the page so the RPM (Revenue per 1000 pvs) is likely higher than Karp cites for TechCrunch, NYT.com, or other A list properties. I think there are a few additional things that are driving the differences in CPMs -

- Expense in circulation/production costs. That direct mail piece wasn’t cheap and neither is the printing of over 1 million copies of an ad. Whether justified or not (and virtually every print ad driven printed publication is seeing advertiser pages shrink) this has been priced into the equation. I know there are costs to serving ads online as well but they are usually shouldered by the national advertiser rather than the publisher.

- Sounds simple but it is meaningful - An executive can point to “his” ad in the NYT’s business section and it will always be there. Much more powerful than hitting refresh over and over again. Part of advertising’s allure is the fueling of corporate ego. Print is better at that than online.

- Display ads online are still very immature. We are still figuring out (cue rich media advertisers to weigh in here) how to use the medium. Print/TV/Radio are medium advertisers know how to use. Battelle writes about this here.

- Not too long ago, publishers like the Times gave away (or bundled in) online advertising to print programs. This reinforced the dominance of their mature business but also devalued online inventory. This is changing on sites in great demand. It will take time. As more newspapers move to 100% digital operations this will likely change. “360 degree buys” or “cross platform buys” are still common and often mask the true value of one property based on how the business wants their product lines to perform. If you want to show growth in online, discount the print. Or vice versa. Multi-platform publishers are looking for share of wallet.

So many people buy as if all ad impressions as equal largely due to the focus on the click through as the primary metric for success/failure of a marketing campaign. More impressions at a lower CPM = a better performing campaign. Google, Platform A (advertising.com) and other offerings do a great job of exploiting that success metric for DR advertisers. As people start to view online as more of a platform for branding that will change.