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Old 09-25-2000, 06:09 AM   #1
Pete
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Question Looking forward to Christmas shopping

Hey everyone, I remember last year's CPM rates going up in christmas times as retailers were ready to do pretty much everything to get more customers. Do you think we should expect something similar this year ???
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Old 09-25-2000, 04:15 PM   #2
Steve_S
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Hi Pete,

Just my thoughts and I don't claim to talk to them.

1) Given the current condition/pull back in the "capital Markets" meaning wallstreet, vc funds, and angel investments I don't exspect a significant increase in CPMs which are very low at the moment. This pull back/correction started in 4/00 and we chronicled and accurately predected it, right here in geek/talk http://geekvillage.com/ubb/smile.gif

2) This period that you refer to is what we call in retailing "the golden quarter" and it starts in 10/00. Those budgets and funds for the big players are already calculated and frozen. Many got "burned" last year and can no longer "go to the well" for funds because of #1 above.

I'm not trying to be negative. Just my realistic views on CPMs only.

Thanks for raising a great question

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Old 09-25-2000, 04:28 PM   #3
Ralph Slate
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The interesting angle to me is, if CPM rates are down so much, why aren't other companies buying?

When the price of PC's fell, then the regular guy on the street started to buy them. Traditionally, whenever the price of something falls, more people jump on the bandwagon and buy.

But the result in advertising is that the rates are low and less people are buying. So instead of having high CPM rates with a large portion unpaid ads, I get lower CPM rates with the same portion unpaid.

At what point does online advertising become viable for offline companies?

Ralph

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Old 09-25-2000, 06:43 PM   #4
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You're forgetting one very important factor in this discussion: the *availability* of ad space has massively increased. Whether it's through pay-2-surf programs, free web hosting sites, ad-supported applications such as free email, free telephony, or any one of a multitude of other channels, the sheer mass of "available advertising space" is much, much larger than last year.

This is not a quantifiable measurement, only "gut-feel" but I also believe the *average* quality of an ad impression (as defined by the quality of the site it was shown on and the "desirability" of the audience to an advertiser) has gone down. For every quality site that's come online in the last year, there are probably 1,000x more "personal home pages" and similar, hosted on free servers...

All of this contributes to the decline in CPM, just as much - if not more - than tightened belts and lower budgets at the Dot.Com companies!

Edwin

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Old 09-26-2000, 02:07 PM   #5
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Well, I think its simply a function of Supply vs. Demand. Right now, the supply is high, but demand is low, so the price is low. Just like if you were a farmer in Iowa who grew corn, if everyone else grew corn, but no one wanted it, you wouldn't be able to sell your corn at a very good price, if you could at all.

Why is supply high and demand low?

1) Supply - Supply will naturally increase over time, this is expected. However, the growth of supply has shot up much more quickly than the growth of demand. There are numerous new sites out there, and more and more people are getting in on websites being a money making biz. PTS programs have also added to the supply, in large quantities. Its a lot like when a foreign company dumps lower quality products into your home market at a lower price and the price drops for your products as well. Furthermore, established sites have watched the CPM rates fall and fall, while it isn't getting cheaper to host and build your site, and living expenses haven't fallen at all, in fact they continue to rise for the most part. So, the natural reaction is to produce more pageviews. This adds even more to the supply market, thus driving the price down.

2) Demand - Demand has fallen sharply in the last little while, as you all know, and there are numerous reasons for that. Part of it is the fact that companies have less cash to burn. In the "Good ol' days" there was plenty of cash to go around. At the same time, people were managing resources very poorly. But that was ok, because they were eventually going to show a profit, right? Now, its harder and harder to get angel money, and IPO's are just barely starting to make a comeback. The money they do get is guarded closely, and used in the most effective way possible. Hint - CPM is not the most effective way most of the time. There are many reasons for this as well, but just one example:

Lets say I'm trying to get 10,000 registered users for my new site. I am thinking about either running some CPM campaigns, or lead-based campaigns. Here is what I find out:

CPM:
Cost: $5CPM - low estimate
CTR I can expect: 0.5% (this is high, recent reports I've read place the average CTR down around .32%)
Conversion ratio: 1/10
Cost for 10,000 Users: $100,000 or $10 per user.

Lead based:
Cost: $2 per lead
CTR/Conversion: Not Applicable
Cost for 10,000 users: $20,000 or $2 per user.

As an advertiser, which looks more attractive to you?

True, CPM still has its uses, but there are becoming harder and harder to justify. We're finding that CTR is dropping quickly, and the "Branding" concept is really not that effective.

--
So, when will CPM advertising go back up? I think once the market shake-down is over, and sites start to become stable AND profitable, we'll see it slowly rise again. However, with the way the 468x60 banner is going (again, very low CTR, my most recent issue of Business 2.0 places the CTR at .32%) there may be some drastic changes in the way it works. I think there have already been some excellent innovations put into place by site owners when dealing with lead-based programs, I'd like to see some of these things done on a CPM basis.

hope this makes sense http://geekvillage.com/ubb/smile.gif
take care!

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