Internet Advertising Analysis Part 7; Effective CPM is currently the only statistic on which comparisons can realistically be based
CPMs: The Effective Price
A better measure of the cost to reach consumers is the effective CPM. Typically, the standard CPM is based on the prices quoted on the Web publisher’s rate card. However, these prices rarely reflect reality. In fact, rate card prices are typically just the opening point for continued downward bargaining between the advertiser and Web publisher. The effective CPM is closer to reality, since it is calculated as the total actual advertising revenue (reflecting discounting and bartering) divided by thousand ads served. We estimate that the average effective CPM today is about $4. We expect this to increase in the future due to several factors. The first is a continuing consolidation of sites under large portals and into networks of sites. This consolidation makes individual sites more attractive to advertisers. A second factor is the shift of greater amounts of advertising dollars online. As the Internet establishes itself as a mainstream medium, more advertisers will devote greater shares of their advertising budgets to it. Yahoo! recently pushed through a list price increase that has been accepted by the market. Yahoo!’s increase is a list price increase, but we would expect that the effective price will also increase.
Table 7 Top 15 “Sticky” Properties of March — Ranked by Visits per User per Month
Although difficult in practice, advertisers must compare the effectiveness and cost of their online advertising to their offline cost and effectiveness. The effective CPM is currently the only statistic on which comparisons can realistically be based, and television is the medium that is usually compared with the Internet. We willingly concede that CPMs may not turn out to be the best measure of ad performance on the Web; likewise, television may not turn out to be the best comparison, but both seem to be en vogue at present.
Figure 8 Inter-Media CPM Comparisons
We can compare the Internet to more traditional forms of media advertising in two ways: based upon “pageviews” and based on 30 seconds of exposure. (In television, an impression is considered 30 seconds of exposure.) Based on pageviews, the Internet’s effective CPM is cheaper than those for all other media except day-time broadcast television.
Table 9 Inter-Media CPM Comparisons
Table 10 Advertising versus Editorial Content
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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