Internet Advertising Analysis Part 6; Calculating CPM and CPM Pricing
Most measurement companies don’t even agree on what constitutes an impression. Some calculate an impression as the number of times an ad is requested. Others calculate an impression as the number of times a page with an ad is requested. Still others measure an impression as the number of times that 100% of an ad graphic is downloaded. Obviously, this results in huge disparities. For our purposes, we will rely on the most commonly applied measure of impressions (and the one that we feel is most appropriate in measuring impressions): the number of times an ad is served (not necessarily fully loaded) to a unique visitor to a site.
Figure 7 Rate Card CPMs for Web Site Categories in 1999
Estimates of list price CPMs on the Internet range from under $1 — for an untargeted site and an untargeted ad — to as much as $100 for a desirable site and a targeted ad. As nearly all Web advertising is priced in some way off of CPMs, it is important to understand the drivers of CPMs. Basically, supply and demand govern CPMs just like everything else in the world. The greater the supply of ad inventory on the Web, the lower the CPM will be, and vice versa. Since the supply of advertising space available on the Internet appears to have nowhere to go but up, it would seem that CPMs are likely to trend downward. However, we believe a better understanding of the branding benefits of the Internet — combined with better understanding of the comparable click-through-rates of traditional media — will lead to increased demand for Internet advertising.
“Rates are plummeting ... for some of the most successful sites, their models are in jeopardy ... if the Internet follows the life cycle of the traditional media, there will be a shakeout.” — Greg Smith, Director of Strategic Planning, Darwin Digital/Saatchi & Saatchi Content targeting is one means of increasing a site’s attractiveness to an advertiser. The more targeted a site is, the more receptive an audience the advertiser can hope to reach. Thus, the advertiser will be willing to pay more for this space.
Table 4 Top 15 “Sticky” Properties of March — Ranked by Millions of Pageviews
Just as a site can be content-targeted, a user can be targeted. As advertisers are better able to target an ad at a particular user, CPMs will rise. The ability to target ads, regardless of what site a user is currently visiting, is the backbone of several Internet advertisers’ strategies. These advertisers foresee a day when a user that has visited a General Motors Web site to view a Suburban two days ago will be served an ad for the GM Suburban the next time s/he goes online.
Table 5 CPM Pricing as a Function of Targeting
Stickiness is very important for sites to generate higher CPMs. “Stickiness” is a measure of the degree to which users stay on a Web property. It may be measured in the amount of time spent on each property, the number of pages viewed per person, or the number of times each person returns to the site. “Sticky” sites will receive a higher CPM than those sites with rapid turnover. Likewise, any advertisement that catches the consumer’s eye, causing someone to take a second look, will demand a higher CPM.
Table 6 Top 15 “Sticky” Properties of March — Ranked by Minutes per User per Month
Continue with:
Part 8; New Vs. Old Media: A Big Market from Which to Gain Share , Part 9; Internet Advertising; Right type of Medium and Targeting ,
Part 10; Broadband brings Rich Media , Part 11, Rich Media Studies , Part 12; What Could K.O. Internet Advertising? , Part 13; Email ,
Part 14; Advertising or Direct Marketing? , Part 15; What Does the Internet Advertising Market Consist of? , Part 16; Rich Media still has some drawbacks ,
Part 17 Inventory and Concentration , Part 18; Market Share and Concentration Data , Part 19; Global Impact, Part 20; Residential and Business Use ,
Part 21; Pageviews , Part 22; Advertising vs. Direct Marketing , Part 23; Investment Conclusion
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