Thursday, November 15, 2007

Crazy Uncle episode #389,235: CPC ads

Why is it that memes in the tech blogosphere are so often structured around "A-List" Crazy Uncles saying stupid shit just to get a reaction, and right-minded people on less popular blogs having to set them straight? The latest is Steve Rubel, who has been particularly stupid lately, pitifully missing the mark again with a piece on why he thinks cost-per-click (CPC) ads are heading for a recession (which I refuse to link as it is nakedly manipulative linkbait) and people like Andrew Goodman at the excellent Traffick blog providing comprehensive rebuttals.

The craziest thing is that Rubel didn't even bring up the main possible reason why CPC ads will see a decline - which is that CPM ads (i.e. display ads which generate revenue for the publisher even if they are not clicked on) will increasingly dominate online ad inventories. That was certainly the case on my site FanFooty this year: for the majority of the year, 80-90% of the AdSense inventory on the site was bought out by advertisers with CPM display ad campaigns, culminating in a battle over the inventory in the second half of the year between Schick and Gillette.

I don't think it would be telling any secrets to say that the difference in earning potential between regular CPC text link ads and CPM display ads hovered for me between 1:5 and 1:30. Cost-per-action (CPA) ads are notoriously poor earners for publishers - you only have to look at Google's failing Referrals product to see that. As Andrew points out, it is folly to think that CPA is going to replace everything, because the three marketing tools each have their place and not every site will engineer its content towards being a simple affiliate marketer.

People have been saying for years that adoption of the Web as an advertising platform has lagged adoption of the Web by users, and as large advertisers shift their budgets online there will be a lot more display advertising to fill publisher inventories. Thankfully we have blogs like Traffick to disseminate useful analysis, quietly but effectively, without needlessly emotional rhetoric.


Anonymous Jonathan George said...

It's interesting that CPM brought in more revenue for you than CPC did. I don't believe that is normally the case - especially with the overall decline in CPM rates over the last few years.

While it may be better for the publisher to use CPM, it's definitely not better for the advertiser. As a business owner myself, I would *never* use CPM. The ROI just isn't there in the long run.

Then again, as I recently discovered, CPC is certainly not the holy grail it's made out to be.

CPA is a different beast altogether. It, along with CPM and CPC has proven itself to be worthy for certain segments. But again, it's not the end-all-be-all.

7:33 am, November 15, 2007  

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