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There are a lot of reasons that CPM advertising can suck. In a post on TechCrunch this weekend, Shelby Bonnie, the co-founder and former CEO of CNET discusses many of them.

Because of CPM's many faults, he makes the argument that online publishers and advertiser simply need to "kill the CPM". In other words, go cold turkey on selling ads on a CPM basis. What to replace it with? We'll figure that out later.

While one can agree with many of Bonnie's complaints about CPM advertising, advertisers vote with their wallets and for the time being, they're electing to keep CPM alive. For Bonnie, however, that's irrelevant. He suggests that we simply need to stop using CPM. Once we do that "the ensuing turmoil will bring creative thinking, new ideas, and entrepreneurial passion".

Unfortunately, that's not the way markets work. Where there's demand, there will be supply and there is demand for advertising sold on a CPM basis. So it's no surprise that online publishers and ad networks are meeting it.

This doesn't mean that CPM is perfect or that there aren't plenty of creative, entrepreneurial people out there trying to find new models that are better. To the contrary: most of us accept that CPM is imperfect and plenty of entrepreneurs have tried to pioneer innovative new ways for buying and selling advertising inventory online.

Yet CPM is still here. Which makes sense when you think about it: CPM is a buying model. It's not a product or technology. Smart advertisers already understand that there's more to a buy than looking at the CPM. Just as you probably wouldn't evaluate beef from two different ranches solely on the cost-per-pound, advertisers don't look at media buys solely on the cost-per-thousand-impressions.

There are significant differences in CPM pricing between verticals, site categories, ad networks and individual sites. This is a direct reflection of the fact that advertisers know all ad impressions aren't created equal. Ads can be sold on a CPM basis but that doesn't mean that advertisers don't have tools to correlate CPM-based ads to the metrics that matter - clicks, sales, brand recall, whatever. While it's true that display advertising suffers from chronic oversupply, publishers (and networks) who do their best to over-deliver impressions but who also under-deliver results typically experience the harsh reality of the supply-demand curve.

The bottom line is that you can price ads using different metrics just as you can price products and services in different currencies. Not interested in 'branding'? Buy ads on a CPA or CPC basis. Or any other basis for that matter. Yet chances are you'll still be looking at the same group of metrics, including impressions. After all, if I'm looking for sales, I might buy ads on a CPA basis. But I still need to know how many times my ads are going to be displayed since I would like to project how many conversions my campaign can potentially scale to. On the flip side, I can buy ads on a CPM basis and still calculate the effective CPA of the campaign.

The beautiful thing about the internet is that advertisers and publishers have an abundance of choice and opportunity. If Bonnie isn't satisfied with CPM advertising and he thinks both publishers and advertisers are getting the shaft, there's absolutely nothing stopping him from selling his ad inventory in a manner that he thinks is more advantageous. Before we kill CPM, that'd be a good start.

Patricio Robles

Published 28 September, 2009 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

2394 more posts from this author

Comments (2)

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Nicola Riva

Interesting discussion over CPM model, but there's one point I don't agree. You say that market is driven by offer and demand, correct, but there cannot be a demand for something that doesn't already exist (a difference metric or model that isn't CPM). What I think is indeed a very good point in Bonnie's views is the desire to see new metrics arise. Discussion is the first step, but later on also advertisers need to experiment and get risks in new metrics in order to gather long-term results. Cpm might be very good in a short-view-strategy but in the long... 

almost 7 years ago

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Hot Boat Deals

I can see that for some types of sites one might want to kill cpm.  But I'm looking for cpm as my salvation.  I run a group of 14 vehicle based websites which several get decent traffic but lack in click thru's because of possibly too sticky content.  Is my content too good?  Or am I not getting enough visitors which click on my adsense ads to make a decent buck?   I averaged around 6-10k uniques last month per site to make nearly 500,000 page views and 80,000 unique visitors.  I'm only making $65 / month in google clicks.  Therefore, if I were to earn $3.00 cpm for the 4 main ad spots or even $1.00 I could actually make $500-1500 per ad position based on 500 cpm's. 

My complaint with google is that their system allows people to bid enough to get their ads on my pages (which gets them brand recognition) but they may not be writing a compelling enough ad to invoke the person on my site to click it.  But even still the user had the chance to read the domain name of the ad and either open a new browser window and type it in or to add it to their name recognition list to say at a later date,...  "I've heard of that, I'll check it out..."  Therefore, I believe that publishers should make a minimum cpm value for displaying the ads on their site.  Single page refreshes shouldn't count towards that but with actual traffic it should. 

So what am I doing wrong?  Why can't I seem to make any money with this site?  Anyone have a suggestion for me? 

almost 7 years ago

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