I always look forward to reading Eric Picard.He is a champion of our industry and a deep thinker. As usual, his most recent article got me thinking about the health and well-being of the online advertising business.
Eric thinks we're in a death spiral of online ads not covering the cost of the content that hosts them. I know many of our leaders, such as Steve Goldberg, share the same fear. But I'm not so sure that the economics are THAT far out of whack.
I have always assumed, as have many others, that oversupply of display impressions has been the primary culprit in the cratering of CPMs. But looking at Eric's chart showing cross-media impression volumes, it becomes clear that display volume, on a relative basis, is not out of line with other media types; in fact, newspapers have the highest impression volume. This tells me there is much more than pure over supply at work here. Seeing this was a "myth-buster" moment for me.
Eric also raises a good point about how much money, time and energy is spent on optimizing ad performance and direct response while brand marketing gets lost. And his point about enlarging creative units makes sense. But in singling out specifics, he is obscuring his very real insight about weak effort around brand marketing.
Financial health is not a question of inefficiency or ad unit size (though these could help).
In fact, CPM's are falling for two reasons: 1) we are now able to separate audience from content which undermines the ability for branded content to command price premiums; and 2) the increasing ability of advertisers to measure effectiveness is driving prices to a point of positive ROI. I believe the train has left the station on #1. This is the new reality and publishers have to find new ways to monetize their assets. But I believe #2 is addressable with a few simple fixes on both the publisher and agency side that will make the medium a more powerful communications vehicle. With stronger performance, the ROI threshold will rise, and buoy the entire ecosystem.
So the big, screaming issue that Eric is poking around is the quality of the online creative itself. While there are exceptions – Apple's ingenious page takeover campaign on the New York Times site – why is so much of online creative today so bloody awful? This is not an issue of ad size, but of the creative spark that spurs interaction and evokes an emotional response.
Clients have created this problem. They seem to not be demanding creative excellence from their online agencies, or if they are, they are unwilling to pay the fees required to get it. Just a few years ago, when online media budgets were small, this made some sense, as the ratio of working media to creative expense had to be kept in line. But with the size of today's online investments, clients are shooting themselves in the foot. They squeeze their agencies' margins to such an extent that there's not a lot of room for them to experiment and do great work.
The agencies are not without blame, either. They are not making the case for the power of great online ideas…but that is a topic for another day.
So here are some suggestions on how to rejuvenate online advertising creative, and in doing so, create upward lift on CPMs:
- -Demand intelligent interactivity in the banner. Way back in 1994 – the Internet's early Middle Ages, really – AT&T's Olympics program made brilliant use of online interactive, at a time when doing interactivity was not so easy. If we could do it in 1994, there's no reason why we can't we do it today.
- -Enabling session-based ad experiences. Instead of having a different ad on each page, advertisers could buy a user's session, with consecutive impressions over four or five pages. This would allow the advertiser to tell a story. That's a powerful concept, allowing the creative to unfold over the course of several pages and truly engage the consumer.
- -Make better use of audio and video. A great example is the GE "imagination" campaign produced by Beeby, Clark & Meyler, with its trademark electronic echo. Bringing audio and video into a campaign can turn something unusual into something that's truly breakthrough.
In addition to creating larger ad units, premium publishers can contribute to more impactful experiences by requiring visitors to watch a 15-second ad as the price of admission to the site. This solution won't work for everyone, but for publishers having unique, differentiated content, it's a solution waiting to happen. It's amazing to me that sites like the Wall Street Journal and The New York Times don't take advantage of this, yet they charge $2 at the newsstand.
Jacking up the size standards for creative, using session-based marketing and enhancing video, sound and interactivity are all steps that can be taken to make the medium more powerful in its ability to communicate. And given that economics are not that far off, a modest improvement in these areas can make a huge improvement in the overall financial health of the industry. Unfortunately, the publishers whose economics depend on this are not in a great position to affect it. Maybe the publisher trade organizations like the IAB and OPA can take this on, and become the champions of creative excellence that we need.
