Ad Pricing: Did We Jump the Gun?

“I know half the money I spend on advertising is wasted, but I can never find out which half” — John Wanamaker, as quoted in Martin Mayer’s “Whatever Happened to Madison Avenue? Advertising in the 90s.”

It was the concept expressed above that made us do it. We media buyers just couldn’t help ourselves. The web was upon us, and we felt compelled to add it to the media advertisers’ arsenal, which we use for executing our marketing and business objectives.

But how to use it? It was a medium that held the promise of yielding more data than any medium before it. There was the potential for me to learn more about you, the potential consumer, than I was ever able to learn before. Advertisers could begin to develop, or so it seemed, true one-to-one relationships with consumers by learning their likes and dislikes directly from the different kinds of content that consumers explored online.

Learning what one did with the medium wasn’t all, however. An advertiser could also find out what consumers were doing with the advertiser’s brand. How did the consumer respond to the advertiser’s value proposition? Did the consumer like it? Dislike it? Fall for it hook, line, and sinker and buy into it?

All of this data and so much more was suddenly available from a medium we’d never dreamed of before 1995.

So, here was this cool new medium. How do we convince advertisers to take a chance on it? There was no research that addressed the medium’s effectiveness. There were no figures that addressed its size or the time anyone had spent with it. Barely a droplet of data that could point out what places on the web most folks were likely to spend their time. And to top it all off, it was new. Let’s face it: Marketers spending large sums of money trying to make even larger sums of money are not interested in doing things that are new.

“Well, it’s kind of like TV,” the industry tried to say. But it wasn’t (and still isn’t). There were no moving pictures, it had a small creative canvas, and there was nothing that resembled reach in the way the traditional world understands it.

“Well, it’s kind of like print,” we proffered. But, again, the canvas is smaller, and if it’s like print, why not just do print?

“Well, it’s kind of like outdoor advertising,” I heard someone once say. Creative with little copy flying by quickly as one clicked forth to his or her destination.

No one accepted that it was like any of these things. And, in essence, it isn’t (yet, in some ways, it is, which I’ll address in a moment).

And so it was that we glommed onto the most obvious killer application this new medium had and thrust onto the world what was thought to be the epitome of accountability and performance: the click-through rate.

Since then, the industry has moved to a madhouse marketplace of pay-for-performance and $1 CPMs. By fixing on raw accountability, we inadvertently created a sort of Frankenstein auxiliary sales channel rather than a viable medium that has value as a marketing tool beyond that of simply being a conduit for moving product. We painted the web into a direct response corner and have had to wait for the paint to dry before getting out of it.

That isn’t to say there isn’t a place for per-inquiry and/or direct response advertising and the like. All of the other media allow for it and price accordingly. But it isn’t ALL they do. Advertisers realize that there is merit to making their value propositions in a variety of environments at a variety of times in order to create the overall long-term effect of branding and, the ultimate goal, the sale of their products and services. There is no reason to believe that the web can’t provide for the same.

I think we got all of this backward in the beginning. We started off promoting the web as an accountable tool to such an extent that we ended up with what we have today: the land of cheap CPMs, CPCs, and cost per action. Solid content providers with a real audience are being forced out of business because the integrity of their CPMs cannot be preserved.

Granted, some of those with dreams of avarice priced themselves too high at the beginning, but the kind of something-for-nothing pricing schemes that have become the norm are not what can sustain this business. The Internet advertising space became overpopulated with arrogant and immature marketers asking for $0.35 CPMs “or we’re going to walk,” with none of them realizing that they are ultimately biting the hand that feeds them.

What we should have done was argue that advertising on the web is like advertising in print, except that a reader can actually respond to the advertisement on the web, and the advertiser can learn all kinds of things about the reader at no extra cost. It would be like having ads in a magazine and getting business reply cards or attitude studies for free.

Creative units should have been developed to remain on a page for the duration of a user’s engagement of that specific page rather than this constant rotation that ratchets up larger impression counts in the hopes of creating more saleable inventory.

Then, as time progressed, we could have made room for pay-for-performance and direct response advertising using the appropriate contexts and the appropriate inventory. Instead, we find ourselves fighting a backward, uphill battle trying to convince advertisers that it isn’t all about CPC and that CPMs on some sites might be worth it given the audience and quality of the content.

Yes, maybe that would have meant that the web would have grown more slowly on the publisher side as different concepts in web content were tested against interest and potential fiscal viability. But most magazines take approximately three years to become profitable. Would moving a bit slower really have been such a bad thing? Or do we like the mass layoffs, stock-price free falls, and tons of bad press that currently plague this business? Certainly hindsight is 20/20. But now that we can see more clearly, isn’t it time to take advantage of good vision?