Google’s CPM Ads Meet Lukewarm Reception

Google’s foray into CPM (define)-based advertising is a clear attempt to woo more brand advertisers, but that may not be as easy as it seems, many marketers say.

“In the grand scheme of the advertising world, this will not have a large impact on the plans of brand advertisers,” said Ron Belanger, VP of search at Carat Interactive. “Does it bring Google into certain conversations going forward that they were not in previously? Yes.”

Google launched a limited beta test of new features in its AdSense program on Monday. It now lets advertisers determine on which sites their contextually targeted ads appear; pay for those ads on a CPM basis; and increase their inventory of image ads. All these features should help Google in its quest to attract more brand advertisers to its platform.

“Google obviously realizes that direct marketing has fueled the growth of the search market, but there are still massive brand advertisers’ budgets out there that are left untapped,” said Joshua Stylman, managing partner of search engine marketing (SEM) agency Reprise Media. Stylman added it’s not just brand advertisers who stand to benefit from the new CPM-based model, but savvy direct marketers as well.

Google dominates pay-per-click (PPC) text ads, which appear next to its search results and on contextually relevant content pages in its network. Now, it’s entering an arena with well-established competition from ad networks, who have offered CPM-based pricing and targeting of one form or another for years.

“Many networks have attempted to attract large brand advertisers by selling their reach, but with limited success to date. That is starting to change as companies like Advertising.com, Fastclick, and aQuantive’s DRIVEpm include targeting variables, such as behavioral and geographic targeting, which make network media more attractive to brand advertisers,” said Shanthi Sitterud, director of media at Avenue A/Razorfish.

Google will have to add these types of targeting variables to compete with existing ad networks for brand advertising dollars, Sitterud added.

Most marketers ClickZ News spoke with agreed the availability of display ads and a new CPM-based pricing model would be attractive as an additional tool for marketers already familiar with AdSense’s CPC-based text ads. But they doubted it would be enough to attract legions of brand marketers at this time.

“I don’t see this program as really affecting what we are doing for our search advertisers,” Belanger said. “If the search campaign is largely for branding purposes, we will migrate to the CPM pricing model and bid as high as we can afford. For direct response clients, we’ll stick to CPC and perhaps concede some of the inventory to those marketers who value the real estate more.”

For non-search brand-marketing campaigns, Belanger thinks eliminating the reliance on direct response metrics will make this a more interesting option for brand marketers. “The minimum CTR [click-through rate] metric was a buzz-kill for brand marketers who demand an always-on ad buy.”

“It can become a big deal, but it’s not one yet. Just because it’s Google, this is going to get attention. But they still have to build out inventory and expand their rich media options,” said Nick Pahade, managing director of Beyond Interactive. “It may bring some new people in, but it’s not a deal-closer. If there’s video inventory, then it becomes a whole different conversation.”

Google’s image ads are primarily animated GIFs, an ad format few advertisers will get excited about considering the widespread availability of much more interactive types of rich media. Google said in a letter to publishers it’s testing a small number of Flash ads from select advertisers, so potential for more interesting media formats is there.

Added complexity is one more reason for advertisers to turn to search marketing agencies to manage their AdSense campaigns, Stylman said. “SEM firms are better able to deal with CPM as another data point. The question is whether they can handle the creative. Most SEM firms are going to have to build those capabilities in-house or partner with interactive agencies.”

A stumbling block may lie on the publisher side. Many larger publishers who sell their own ads have used Google’s AdSense ads to monetize unsold inventory. If advertisers can get a better CPM rate through Google, the publisher loses money, and Google becomes a competitor for ad sales.

“If you ask the larger publishers if they’d be willing to outsource additional inventory, my guess would be ‘no,'” Pahade said. “Most of them would probably be able to get better CPMs on their own.”

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