Unimaginable — Yet True

I love inefficiencies. Any business person should. It’s on the tail of inefficiency that smart people can come in and take revenue, make profits, and generally clean up. So, in the spirit of constructive criticism, here are 10 screaming inequities in our industry:

  1. Newspaper can print a whole 32-page tabloid with 250 ads in it for $0.20 each, but it costs a Web site 25 percent more to serve the same number of ads.
  2. Sites generally sell about 10 percent of their inventory, yet they won’t lower prices to a level where most of it will be sold.
  3. Buyers spend the lion’s share of their budgets on brand-name sites, such as Yahoo, MSN, and AOL, despite a universal understanding that these are among the most expensive sites for untargeted media.
  4. Advertiser budget splits among different media are primarily determined by a reward system for media managers rather than the relative efficacy of the media themselves.
  5. Though many infrastructure companies see individual deals done between sites and agencies, none have offered a product revealing average negotiated rates of online media. Are they so site-centric that they don’t wish to stir up trouble on the supply side, or is it that agencies don’t want to know how poorly they negotiate?
  6. After spending billions on Internet media, serving technologies, databases, and the like, ad buyers still don’t have data sets that reveal anything but the most unsubtle trends and relationships. Yet buyers decline to force sellers to use more precise metrics to refine the data.
  7. Assuming the industry continues to spend around $8 billion annually on online media, it can probably support an employment base of about 70,000 employees (using the industry average of about $120,000 of revenue per employee). The top three companies in online ads — AOL, Yahoo, and MSN — employ more than that. Who pays for everyone else?
  8. Local media in the offline world account for about half of all ad expenditures. They barely makes a blip in online media charts.
  9. Though advertisers regularly assume broadcast advertising has positive long-term sales effects, in their own online advertising they seem to assume immediate, traceable sales as the sole benefit.
  10. Hundreds of branding studies (some by disinterested parties) have proven it, yet few creatives in the industry believe online ads are as effective as TV creative.

Here’s to 2002 — and the hope that we will see people take on these issues, fix them, and become successful in the process.

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