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Old 05-24-2001, 04:08 PM   #1
deemis
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Exclamation CPM is Dead, Are you?

Hi All,

I've been lurking on the BB for quite sometime, and finally wanted to do some posting. http://geekvillage.com/ubb/smile.gif

I see a lot of posts on this board about the "state of the economy" and how it affects the Internet advertising market. I think, in my opinion, that many of you are misinformed about the realities of the Internet advertising market. And I would like to shed some light, or attempt to, on the actual situation.

* Let me preface this by saying that I have been involved in Internet advertising/marketing since 1994, and have made my sole living from it since that time. I went from zero to having made several million dollars online during this timespan - without stock of anykind; talking merely profits. I don't say this to try and "impress" anyone or anything else - in fact, the email address I am using is in no way connected to me personally (i.e. through the domain name, company, etc. - it belongs to someone else that I consult) and I am pretty much posting anonymously. I am not here to promote ANYTHING that will bring me even one penny of financial gain, I am just here to post my opinions and experiences and hopefully it will help others. My own network of developed web sites has reached over a billion unique visitors since inception - and none of them are adult related. I won't mention any of them here, but many of you have probably used some or most of them.

The current Internet advertising market is NOT being driven by the stock market. Surely, when the market is on a strong uptrend companies spend more on advertising - I am not disputing this fact. However, the bulk of what's driving the pricing levels of online advertising today is simple - SUPPLY AND DEMAND.

On a banner impression basis alone, there are for more available impressions than what the market is demanding. There are now MILLIONS of web sites generating pageviews and traffic and trying to monetize the value of those pageviews by serving banners - or other forms of advertising. This massive oversupply has driven down the value of the traditional CPM-based banner impression value. It is only a matter of time before CPM rates for banner impressions in general will be about 10 cents. And because of this, CPM buys will DIE. Within 2-3 years, no advertiser will buy advertising online on a stricly CPM basis. GUARANTEED. What will happen is that advertisers will begin buying advertising in more of a hybrid structure - such as partial cpm/cpc/cpa. But the bottom line is, the time has come where the advertiser will no longer assume ALL OF THE RISK. The "risk", i.e. performance of a campaign, will now be shared by the Publisher - i.e. Web site owner with the traffic.

SAY HELLO TO PERFORMANCE MARKETING

Performance Marketing is taking over the Internet, and *IS* the total future of our medium. Performance Marketing, aka affiliate programs or deals where a commission is paid only AFTER performance is achieved, is the future. Either embrace this as a Webmaster, or get out of the game if you expect to make any money.

Performance Marketing is a beautiful thing for a business. They basically say, "I'll give you $1 for every $1 in profit your action will make me". How many TIMES do you think the business would take that action? They will take ALL THEY CAN GET - because they make money guaranteed. Performance Marketing allows the advertiser to structure something upfront that will only bring them a positive ROI on each dollar that's spent - unless they're idiots. This is a NO LOSE situation for advertisers. Never before in the history of business has there been such a strong marketing channel for ANY COMPANY to utilize. Every action, every step, everything is fully quantifiable and makes a positive return if they accurately set the performance marketing payout in advance.

FEAR NOT, EFFECTIVE CPM IS ALL THAT MATTERS

The bottom line of everything is still this, WHAT *EFFECTIVE CPM* are you getting for your traffic? Effective CPM meaning even if you sell your banners on a CPC basis, or straightup cost per sale basis, it can still be calculated back to how much money that produced for 1,000 banner served - giving you your "effective CPM" return. The sole key to each and everyone of us in this great "Game" of Internet marketing/advertising, is to maximize our profits through the strongest monetization of our traffic possible - i.e. making the most from our pageviews and userbase. It really doesn't matter if you are able to do deals on a CPM, CPC, or CPA basis, as it all comes down to how that equates for an effective CPM for your ad inventory.

THE BAD NEWS

Many web sites will go out of business because they will not be able to effectively monetize their traffic to support their sites. Right now because of the oversupply of banner and other ad inventory, the advertisers are in complete control. They are paying as little as possible and getting many takers.

THE GOOD NEWS

This lowballing of the current group of major advertisers will not last forever. Just like with radio and TV advertising before it, it sharply rose, then took a nosedive, then advertising rates "settled". As more and more companies come to the Internet to market (through performance marketing) they will have no choice but to pay higher commissions or no one will promote them - webmasters will be busy promoting higher paying programs. This overall trend will give webmasters some of the "power" back and will force advertisers to payout higher commissions and thus will steadily raise the value of the effective CPM.

It is up to you to work hard to figure out the performance marketing campaigns that will produce the most for your web site based on its content and user-reach. If I could give any of you some advice it would be to look into establishing RESIDUAL INCOME STREAMS. Look into promoting programs that will pay you again and again for work you did ONCE. Build up a steady residual income stream that will at least pay your core expenses, and then once that is done everything else is pure gravy. You must make one dollar before you can make one million. No one has EVER done it otherwise.

Thank you for reading my rant, and I hope some of you got something from it. I wish everyone on this BB the best of luck with their online ventures.

-J
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Old 05-24-2001, 04:12 PM   #2
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That was too long to read so I will just reply to the subject:

No, I am still alive.

Just my 2 cents...
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Old 05-24-2001, 04:28 PM   #3
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I'm totally with you deemis. The pure CPM business won't take over again. Performance based advertising will be the way to go, and that's exactly the great advantage of online advertising over TV, Radio (Yes you can make phone order, but that's only a small portion of TV advertisement. )

And yes, we will survive as long as there is INTERNET and its related business. http://geekvillage.com/ubb/smile.gif
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Old 05-24-2001, 04:37 PM   #4
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I want to also add that there is a tremendous number of opportunities in a widerange of markets online. There will be many people that will not start an online business until many years from now and they will go on to make millions of dollars. So people shouldn't think "I missed my window" to make money. There will ALWAYS be an opportunity to make money, it just takes ADAPTING to changing conditions and staying ahead of the pack of competitors.

-J
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Old 05-24-2001, 05:14 PM   #5
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Welcome to the forum Deemis!

I totally agree with you , especially when you say "FEAR NOT, EFFECTIVE CPM IS ALL THAT MATTERS". Few people understand this. I have talked with countless people who think that $1 CPM is better than a CPA program that pays $1 per lead, gets a 1% CTR and converts at 25%.

I think the main thing is CPM is easier. Finding good CPA programs and having the patience to test them is difficult for a lot of people. Whenever a new CPM firm pops up, even if they aren't serving any ads yet, there is a buzz of excitment, even if they only promise low rates. Rarely do these companies deliver. They pay lower, reduce rates (often retroactively), and pay late/never. Yet we still have a fascination over them. On the other hand, when well performing CPA programs are announced or discussed, they rarely receive any attention.

That said, I can see how CPM is good for publishers - they can do what they do best, and allow ad agencies do what they do best and sell ads for them. But, this just isn't possible right now, especially for smaller sites. In most cases, I don't see CPM as being viable in the near future, but there are always individual situations where it will work great. If you can get a decent CPM rate, more power to you http://geekvillage.com/ubb/smile.gif but at $.50 and $1 CPM, you can probably do a lot better with CPA and/or CPC, especially given the instability of CPM companies lately.

I also agree that performance marketing is the future, because it can be sustained. As an advertiser, if I was paying $10 per sale on a product I netted $15 for, I would buy as many sales as I could. If an affiliate is making $20 CPM off of that, I'm happy because I'm getting what I want. However, if I have to payout that $20CPM and then I average 1 sale per 5,000 impressions, I'm not happy. The affiliate is making a lot of money, but I'm losing money. I'm not going to do that very long. Likewise, if I am making a lot of money per sale and then pay the affiliate virtually nothing (can you say $.05 CPM shock the monkey banners?), the affiliate isn't going to stick around longer than they have to.

Business is a two-way street. One side can't exploit the other for too long, and the best relationships are those where both sides are happy http://geekvillage.com/ubb/smile.gif

Just my thoughts, I don't know if I made any sense http://geekvillage.com/ubb/smile.gif take care


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Old 05-24-2001, 05:31 PM   #6
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Personally...

I see sponsorships as the way to go. Build up at least 250k impressions a month, and then strike a complete deal with a company that sells products under your 'segment' and a nice overall 'effective' CPM can be generated.
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Old 05-24-2001, 05:37 PM   #7
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Question

Ok I understand that CPM is going to die very soon. I just want some advice for a webmaster with a site that is not content driven. I own a free message board site where I give away free message boards to who ever wants them.

My problem is this. Being a message board site, my CTR is at around .04% (ouch !). So even if I were to run an affiliate program, chances are people will not click it. I have ran many trial runs with CJ programs with no success.

I was just wondering if there was a "Run of the network" affiliate program where people click a banner and shop around for various things. If anyone could offer advice, please do so ! http://geekvillage.com/ubb/smile.gif

I wanna be a millionaire damnit !
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Old 05-24-2001, 05:47 PM   #8
kerplunk
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You guys have it a little wrong.

CPM will not die. It will continue to be the major money maker for major sites, except it will probably die out to anyone who doesn't get 10 million hits per month or more.

That's all I have to say. I can't get this damn adcycle program to work right...

&gt;&gt;&gt;
&gt;&gt;&gt;&gt;&gt;&gt;&gt;
&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;
&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&g t;&gt;&gt;
&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&g t;&gt;&gt;&gt;&gt;&gt;&gt;
&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&g t;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;
&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&g t;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt; &gt;&gt;
&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&g t;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt;&gt; &gt;&gt;&gt;&gt;&gt;&gt;
&gt;&gt; START BUILDING ADCYCLE &gt;&gt;


Step 1 - Checking for Perl

&gt;&gt; Great! Perl was found


Step 2 - Checking for DBI.

&gt;&gt; Today must be a good one. DBI was found


Step 3 - mySQL driver check

mySQL driver was not found. Please download it from the URL in the README file.

ARG!!!!!
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Old 05-24-2001, 06:05 PM   #9
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::CPM buys will DIE. Within 2-3 years, no advertiser will buy advertising online on a stricly CPM basis. GUARANTEED

Yep, he's right, 100%!!! My guess is that if there are ANY sites with any CPM banners up in three years it will be the extremely popular sites on the web, like yahoo.com, and aol.com. Now's a good time to start selling stuff if your not allready doing it. Affiliet programs at amazon.com, cj.com, onresponce.com, and clickbank.com will replace the dying, if not allready dead, CPM companies.

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Old 05-24-2001, 06:08 PM   #10
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Suresk said what i've always thought...

I think the main thing is CPM is easier.

Because well... that's just so true. CPM, you build your site... stick a banner on the top, and there you go... (if you've got the traffic) you'll be making constant money; whether your visitors notice the ads, ignore the ads, or click on the ads.

That being said... it'd be sweet if things were that way http://geekvillage.com/ubb/smile.gif

But heck, my sites... effective CPM's have always been great; I can have no banners around at all... but get a nice CPM of over $10; and that's just from a little extra work http://geekvillage.com/ubb/smile.gif

B2GDotCom... with my message board, i've had goodluck adding one or two banner exchanges to it... and then with the impressions I save up in the exchanges, I use them to advertise something i can make money out of... works well.

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Old 05-24-2001, 06:25 PM   #11
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CPM will be around for a long time to come. It will most likely only be available to large sites and/or well established domains.

For many businesses, CPA campaigns do not work. GM is not going to run a CPA campaign to get people to buy a car. They're going to run campaigns that will make people aware of their car.

CPM and CPC campaigns do what advertising is supposed to do - give people information about a good or service.

For example, the dialtone internet ad on this page is most likely a CPA campaign (just guessing here - could be wrong). Right now, I'm in read and respond to messages mode - not shop for web hosting. But tomorrow, I get up and my host company has ******* up for the last time and I say gee I'll check out dialtone internet. I'm not going to the website via a banner but I'm taking the information from the banner and visiting their website.

Effective as a CPA - no, I didn't click and buy. Effective as CPM - yes, I remembered their name from a banner and went to the website.

Sorry for how long winded this was but just my 2 cents.



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Old 05-24-2001, 06:33 PM   #12
deemis
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Just a comment about the "Sponsorships" post.

Sponsorships are just ads (of anysize) in sheep's clothing - so to speak. People think "sponsorships" are something other than paid advertising. They aren't. They are price-based according to a number of impressions and will ultimately come down to ROI and PERFORMANCE for the "sponsoring advertiser".

Get a sponsorship and see what they do if they aren't getting a good return for whatever they are paying. Again, a sponsorship is just a sneaky way of renaming an advertiser. But the metrics and what matter are still the same.

-J
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Old 05-24-2001, 06:39 PM   #13
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Lil_Red,

Thanks for your insight.

True CPM will be dead. Even companies like GM that you speak of that will be spending a lot of money for just BRANDING, still want quantifiable results - such as site visitors. I can guarantee not even GM would pay Yahoo $100 for CPM banners if they weren't get ANY CLICKS and bringing people to their site - even if the plan wasn't to try and sell a car from that simple visit. A "click" itself in a metric of performance, and advertisers will demand that and more. So companies like GM will at least be concerned with clicks and getting visitors.

Something else people need to understand is that the Internet is a true DIRECT MARKETING medium. TV and Radio are not. TV and radio both completely interupt the user experience - i.e. only a commercial is viewed/heard at a given time and it is not contained within content. Therefore branding is valued differently on those mediums (which has taken millions of lost VC money and many dotcom bankruptcies later to realize), and it can't be compared to Internet advertising. Internet advertising is all about ROI and RESULTS.
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Old 05-24-2001, 07:35 PM   #14
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Basically, I agree with almost everything deemis is saying. Simply because I made that same supply and demand statement month(s) ago. So far I haven't heard of any report stating that the net ad market has been decreasing. However as you all have noticed actual paid banners (RON CPMS mostly) have been decreasing in both price and quality.

Why? To the more graphic people such as myself, here is a very basic explanation that doesn't include other factors such as advertisers shifting from fixed CPM to performance based ads.

Here is the increase in ad spending this year:

---------

Here is the increase in ad space:

-------------------------------------------

Also about CPM, it's not going away. However I can't imagine small sites (under 100,000 imps monthly) receiving more then .3 CPM. Why? Simply because it's not worth finding/designing ads to suit individual sites in a way that will give the advertisers enough ROI to justify a higher buy. Is this because ad agencies have something against small sites? Nope, it just not economically feasable.

Currently the big guys (who sponsor small sites) aren't doing very well. Okay so DBClick is not doing so well either but Engage for as long as I can remember has been taking losses for quite a while. Infact even before their ad sales decreased. This goes to show that they have yet to perfect their business model. The fact that they are doing something that isn't even a decade old has a lot to do with this.
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Old 05-25-2001, 04:49 AM   #15
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CPA will not take off until the CPA industry cleans up its act. I won't use CPA because of the stories I have heard (and experienced with Reel.com) of:

- Sales not being credited until you complain.

- Payment levels that are too high, and programs where you forfeit your earnings if you don't meet the levels.

- Merchants who try and cheat the publishers by circumventing the tracking (1-800 numbers...)

- Merchants going belly up so that you lose your commissions.

- Programs that change their terms once you have committed to them.

- CPA agencies that use the "we think you're cheating so you don't get paid, but we're not obligated to tell you" method.

Basically, CPA is associated with whatever is slimy about the internet -- and in most (not all) cases is just too risky.

There is another type of advertising that no one talks about -- pay by the month. I have had a good deal of success with this because it is something that most people are comfortable with. It's like taking out an ad in a magazine.

I can tell someone "you can take out a 1x1" ad in the Hockey news for $150 an issue that people may not even see, or you can advertise on my site for a whole month where X people will see your ad for the same price. People understand those terms a lot more than if I said "I'll give you an ad for $2 CPM".

Ralph
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