Are CPMs Rising? Will We Hit $19.5B in ’07? How to Spend and Get the Biggest Bang for the Buck. It’s in the Technology You Use.

Are CPMs on the rise?  Is it getting more expensive to advertise online?  Are more advertisers coming online, competing for exposure and driving up the rates?  Will the online spend projections for 2007 be reached or even exceeded as a result of more online advertisers or as a result of publishers driving up rates in response to the demand?  How do you take advantage of available technologies to become more effective with the media you buy to keep your ROI in check, your CPA down and your hair on your head!?!


 


Did you read the NY Times eCommerce Report today?  Ad Costs on the Web Are Rising, but Perhaps a Bit Irrationally.  Are they?  Haven’t they been for a while now?  But wait a minute.  Are we talking about rate card here or are we talking about actual deals.  Maybe both.  The deals are getting more complex.  The media plans, more comprehensive – web sites, networks, search, email.  How an advertiser leverages the technologies that each medium within the online space makes available can dictate how effective those dollars are spent.  But watch out!  Differentiating technologies that improve performance can cost and the incremental cost can blow your return.  So let’s look for what works.


 


The NYT does a good job of presenting a few different sides to the picture, because the reality is that rising rates is happening where the pressure is strong and the reverse is happening where it is not.  Where traffic is growing at a pace that is out-stepping demand (like with video) the price is falling.  But the premium pages where everyone wants to be, which continue to have increased traffic, is experiencing rising rates.  Search definitely has rising costs (see my previous post, Banners vs. Search) like on Google.  As more and more advertisers include online in their budgets, the rate pressure increases.  So yeah, rates are getting squeezed from that angle too.  Read the article if you want more examples.


 


So first let’s look at what you are aiming to accomplish.  Are you branding or going for direct response?  Promoting a message or generating leads, customers and sales?  If you’re direct response, keep it simple.  Email advertising drives actions but with low response rates so test, test and re-test.  Either do it in-house or enlist someone like Exact Target to do it for you.  Keep the budget in check and don’t have expectations that are too high.  Best thing you can do is reserve most of your email advertising as direct marketing to existing customers and then test-market prospecting to reputable lists.


 


If you read my blog, you know how I feel about Search.  It performs really well in the near term but can quickly grow to be less and less effective over time.  The most successful campaign will quickly become the most expensive if you don’t know what you’re doing or if you leave it on auto-pilot.  So you have to stay on top if it and know that you can’t stay with the terms that work for you now, long-term.  The rates will climb as they perform so set your thresholds and when you hit them, dump the terms and move on. 


 


Using a SEO provider will be helpful if you are buying in volume.  Ad servers that provide SEO integrated with their tools are a nicety since the reports are integrated with the banner campaigns, but remember you are getting a service that is outside of the wheelhouse of what ad servers do.  It’s always best going to people who are working at their core competency.    SEO is a technical science that is still rapidly evolving (believe it or not).  Google has changed the Adwords pricing model so now it costs more to keep checking the bids, so technically-advancing SEO companies will be gaining ground faster than ad servers for whom SEO is peripheral to their business. 


 


Banner advertising is a foundation of a campaign.  Now we can look at both Direct Response and Branding campaigns.  If you’re running direct response, it’s CPA all the way or remnant network inventory at remnant-priced CPMs.  Remnant inventory should not be getting more expensive.  More people going online every day and spending more time online every day means more inventory so buy aggressively. 


 


If you use an ad server with DR, you will gain the ability to A/B test creative and messages and optimize your campaign.  In turn, you will generate more leads from the networks and sites.  Obviously you’re not going to go with an ad server if you’re buying on CPA alone.  The ad serving costs will be astronomical.  But if you have CPM buys you should run them through the ad server and then run the same creative through your CPA buys. 


 


Try to always have at least some CPM portion buy even if you are a Direct Response advertiser so that you can be testing and improving your creative.  The reason for doing this is that networks who are delivering to you on a CPA are optimizing their inventory.  As your performance drops, your ad play drops.  You won’t even know when or why it is happening or which of your banners are producing the decrease in performance of plays vs. click-thrus but your lead flow will diminish.  So have a place to be testing creative so you can float optimized creative through your CPA buys.


 


With branding campaigns you are obviously more apt to be buying on a CPM basis.  Even if you are looking to generate some level of response, but not a typical Direct Response campaign (e.g., lead generating) you may be buying more premium inventory.  In this circumstance, you really need to be looking at the available technologies because you are entering the realm of rising CPMS.  You are going to be the most concerns with diminishing ROI.


 


So let’s look at ad networks.  Let’s look at behavioral targeting.  Let’s look at customer re-targeting.  Let’s look at campaign optimization and other forms of targeting.  Let’s look at storyboarding.  And let’s look at other ways you can leverage the ad server cookie file.


 


Before we jump into all of that, when you buy on premium sites, if you are not paying close attention to your campaigns, reporting frequently, rotating creative and optimizing campaign performance with a competitively priced ad server you are simply wasting your clients’ (or your own) money.  Ad servers are designed to optimize campaign performance so if you are buying in an environment wherein CPMS are rising, negotiate solid, competitive ad serving fees that decrease as your volume increases (no fixed CPMs people) and use the hell out of the ad server to maximize your campaign performance.


 


Ad servers provide a host of targeting and optimization capabilities like day-part, geo, storyboarding, limits and cookie-targeting.  Know what your ad server can do and leverage these technologies because they don’t (or shouldn’t) cost any extra.  Turn to your ad serving partner (not vendor) and express your issue with rising costs and get them to help you maximize how you use their product.  Don’t let them charge you for the training you need to become a more proficient user of their tools.  Optimize your campaigns so that you are maximizing your return.  Storyboarding can limit the frequency of an ad –play to an individual.  Great.  What about other ways to leverage the cookie file?  Can you define data in your ad server’s cookie for additional targeting?  We do it all the time. 


 


Ad networks should allow you the opportunity to see site performance data.  They may not give you performance on all sites, but you should be able to dive into the top-X performing sites.  When you buy on a CPM, get access to the data and maximize your exposure by managing your campaign. 


 


You have two choices with networks.  You can let them serve your creative or you can use an ad server.  If you use an ad server, you maintain control over creative optimization and you leave site optimization to the network.  If you let the network serve creative you are entrusting both to the network.  Do you have an ad server in place?  If you do, than you should be using it to optimize your creative on the network because the networks are (whether they admit it or not) ultimately optimizing the creative-site play combinations in a way that optimizes their inventory usage.  You can improve performance overall by managing your creative rotations yourself.  Then you can apply pressure on the network to optimize site placements.  Look at the reports you get from them on site performances and start culling sites that don’t work or negotiate a variable CPM for tiers of sites based on performance if you start to recognize a pattern.


 


Behavioral Targeting.  We talk a lot about BT.  Network BT is different than ad server BT.  TACODA or Advertising.com charge an incremental fee for BT but it is not super significant and it does improve your performance on their networks.  It is a technology that is worth taking advantage of for prospecting new people on the internet.  Test it and measure a campaign with it and without and you will be able to determine if it is right for you. 


 


You shouldn’t be seeing too much price pressure on the networks, at least not in 2007.  I say this because there is such a surge in the number of new networks that competition will be putting pressure on their prices.


 


Ad server behavioral targeting like DoubleClick’s Boomerang is an entirely different story.  The difference is that DC BT is looking for the DC cookie anywhere on the internet it can find it based on the same cookie/pixel combination that a TACODA or Advertising.com deploys.  They pixel the advertiser’s site, wait for events on the advertiser’s site such as certain actions like page views of products or purchase/thank you pages and then cookie the user.  If/when they encounter that user on the internet, they recognize the cookie, associate it back to the event(s) and allow for targeting of an ad based on the anonymous event.  Great conceptual technology but expensive.  DC is already a premium-rate ad server so when you tack on Boomerang you are looking at high fees.  Couple that with rising CPMs on publishers and you are quickly looking at the potential of a negative ROI.  You need to look at this very closely.  Many big-block advertisers with exclusive contracts with DC, or agencies with exclusive DC contracts, don’t use Boomerang because it has proven to not be cost effective.  Ask for their client list and you will get their biggest names.  Then ask which ones are using Boomerang and you will see what I mean.  Do your own analysis before you even bother testing it.  Atlas and Mediaplex too it’s the same story.


 


Customer Re-targeting is similar to BT, only it involves the reading of an advertiser’s first party cookie rather than the ad server’s cookie.  TruEffect, for example looks for an advertiser’s customers who are tagged with the advertiser’s cookies, which indicate a customer segment (such as shopping frequency or buying habits or preferences, etc.) and then allow for the ability of that advertiser to target that user accordingly with an ad through a campaign anywhere on the internet at any time.  This technology has no incremental cost in terms of the ad serving so it is a benefit of working with TruEffect over other ad servers.  Direct Response advertisers can use it to drive recurring revenue opportunities from existing customers.  They can up-sell, cross-promote or highlight products or services to individuals based on known shopping preferences rather than re-prospecting an existing customer through an advertising campaign.  Customer re-targeting is a great campaign addition to be used in combination with something like TACODA or Advertising.com prospecting BT.  This is an example of a technology that will drastically improve performance without increasing your costs, effectively increasing ROI.  DirectServe, as it is called, can also be integrated with Search campaigns as discussed in Search and Networks: Better Together – I Think So


 


So there you go.  CPMs may be rising.  We can see that the pressure to drive up CPMs represents an increase in the number of buyers (demand) and publishers seeking higher rates for their products will push the 2007 ad spend up and probably over the projected $19B mark.  We need to be well aware of how we allocate our budgets and that we are taking advantage of the technological benefits out there that will help us maximize campaign efficiencies so that we can keep our overall costs in check to maximize the ROI.  Costs are rising, ad serving rates are steady or even dropping if you are buying more inventory as an agency overall.  Don’t get sucked-in to value-added services that chip away at your ROI without some complimentary tests that will prove their value.  Vendors do want to demonstrate their value to you and the pressure you will be under to maintain ROI will mean you will have to get more aggressive in your negotiation with vendors.  Good luck. 

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