Tag Archives: Web Design and Development

When CPC and CPM Meet

DoubleClick recently released its benchmark figures for 2009. The overall Click-Through Rate (CTR) clocked in at a whopping 0.1%, which is comparable to the figure for 2008. For those of you not quick with a percentage, that means that for every 1,000 people who view an ad, one person clicks on it.  Click-Through Rates have been on the decline pretty much from their inception, starting at CTRs of 10% and 15% and drifting downward ever since. The fact that they have settled in around 0.1% may indicate that they have finally reached their low-water mark.

This figure is also significant because 1,000 is the rate that some publishers use to sell display advertising (Cost Per 1,000 Impressions or CPM).  It used to be that most CPMs charged by publishers were much higher than the cost per click, or CPC, (because click rates were higher than one in a thousand.)  Now that click rates have sunk to 0.1%, your CPM is your CPC. So if a publisher is using a CPM-based analog pricing model, and trying to charge a $50 CPM (because of their rich content and their valuable audience), you better be prepared to pay $50 a click. Conversely, if you are only willing to pay $10 a click and the publisher wants to charge $50 CPM, you best tell them to get real.

Not so un-coincidentally, Google recently decided to enter the display market. Google made its name in paid search by charging on a CPC basis and letting a free market-based bid model (theoretically) determine the CPC price. This created no real mystery for the advertiser, as they only pay for people clicking on their ads, and the bid model tells them what it will cost.  More of this kind of economic model will be a welcome entry to the display market. We should expect CPM-based publishers to start professing the brand message value of the display ads, and that it’s not all about clicks. Good luck with that one.

— Mike Reineck, Principal

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Why buy a cow?

I saw an article on MediaPost.com with the headline “Nielsen: Users Won’t Pay For Web Sites” and thought immediately of the saying ”Why buy the cow when you can get the milk for free?” (although this phrase normally refers to an entirely different situation.)

The Nielsen survey indicates that nearly 8 in 10 Web users (79%) would give up using a particular site if they had to pay for the content on that site. And this is surprising in what way?  We’ve seen this in all aspects of life. If you give customers free merchandise and they’re used to it being free, what makes you think they’ll magically pay for it if you decide to charge? People are resourceful and will eventually find what they want online, without having to pay for it.

Again, and not surprisingly, nearly three-fourths (71%) of those surveyed said that if they’re going to pay for something online it better be well worth it and be considerably better than what they’re currently receiving. That’s called the price/value relationship.

I really don’t think this is news to online publishers. They’ve been trying for years to figure out how to charge for the online information many of them now provide for free.  The stately New York Times found this out first hand when it decided to charge for premium content. Only its readers decided that the content wasn’t so “premium” as to warrant money out of their pockets.

It’s the price/value relationship that determines if people are willing to pay for content. The barn door has been open, and the publishers have been giving away their “milk” for a while.  They had the opportunity to charge and shape the user experience, and they didn’t take advantage. Call it a calculated gamble. One that they lost.

— David Capano, Director of Media Services

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