October 04, 2001
Last week the Internet Advertising Bureau announced that January-June 2001 online ad sales were down 7.8% compared to last year. We took a closer look at those numbers (including some numbers the other media don't have yet) . and then we interviewed 18 online media brokers and sales reps to find out what's changed since June 30th. In other words: what's really selling right now. Before you read this free report, here's a quick glossary:
- IAB - Internet Advertising Bureau;
- CPM - cost per thousand (how web sites want you to pay for ads);
- CPA - cost per acquisition (how eretailers want to pay for ads);
- CPC - cost per click (how lots of deals end up being done now).
Note: this Special Report runs about seven printed pages long so you may wish to print out to read more easily.
1. Hard Numbers
Released this Monday September 24th, the Interactive Advertising Bureau's (IAB) latest Internet Ad Revenue Report revealed that online ad sales for the first two quarters of 2001 were down 7.8%. However, there was one ray of hope for new media -- ad sales for offline media such as spot TV, spot radio and Sunday newspapers were down a lot more than that (14.7%, 22.4% and 10.4% respectively.)
More details from the Report, including statistics on CPM versus CPA sales and which ad formats were selling as of June 30th, are available in a news release at: http://www.iab.net/news/content/09_24_01.html
The release is clear enough that we didn't feel we'd serve you better by simply regurgitating it here. However, Tom Hyland, Chair of PricewaterhouseCoopers' New Media Group, who created the Report for IAB shared the following statistics with us, which have not been released to any other media yet:
Percent of Online Media Sold by Type of Content Site
Site Content % sold Qtr 1-2, 2001 % sold Qtr 1-2 2000
SE/Portal 27% 39%
Classified 14% 10%
Technology 12% 11%
Biz/Financial 10% 15%
News/Info 10% 9%
Shopping 9% n/a
Entertainment 5% 4%
Sports 3% 2%
Travel 2% n/a
Other 7% 9%
Hyland also noted that currently he's not tracking the differences between B-to-B content media sales and B2C content media sales. (Don't be confused by the pie chart on the IAB press release that's labeled "Consumer".) He is, however, considering this for the future if there's enough industry interest in it.
These IAB results stop short at June 30, 2001. So, to learn more about what's really selling online this fall, we conducted our own informal survey by contacting a bunch of folks who have a great, frontline view -- online media brokers and networks.
Their responses were sometimes predictable (you knew CPA deals and pop-ups are hot already, right?) and sometimes fascinating (wireless ads are selling at CPMs that most Web sites can only dream of.)
While this report is based on anecdotal evidence, rather than scientific data, we hope everyone whose business model includes selling ads online will find it useful.
2. Today's Pricing Models
Although the IAB report reported straight CPM buys as 50% of all sales, we strongly suspect that if the report had shown just shown June (vs. January-June), that figure would have been significantly lower. According to all sources, CPC and CPA deals now dominate media buys online, with the exception of buys for high-ticket B-to-B offers.
B2BWorks' Karen Breen Vogel explains, "Because the purchase cycle is significantly longer and the lifetime value of a customer is often higher in the B-to-B space, CPA arrangements are not the most appropriate and could be very unbalanced in favor of the marketer."
Although Breen Vogel adds that "the site/publisher should still receive credit for more than just an immediate sale -- for example branding that translates into other downstream sales results", and lots of research studies show that online ads result in significant branding value, as CyberReps Founder Mike Warsinske put it, "Branding has left the building."
He explains, "Advertisers are laser focused on lead generation."
Opt-Influence's Todd Kellner, who specializes in email newsletter ad sales, notes, "If you're willing to do CPA there's all kinds of deals out there, or if you're willing to take CPM at 50 cents to a dollar." He and several other media sellers also added that many deals represented as CPC are actually based on CPA. Steve Cranston, Director of Ad Sales for AdDynamix and The PennyWeb Network, says, "Although we do have many inquiries of CPA deals, our most telling message from advertisers is that they are moving completely away from CPM and settling in comfortably with CPC buys, as long as they can accurately track the resulting CPA."
Kellner notes that publishers and site owners should always ask to see creative before accepting a CPC deal. For CPAs, you should also ask to see the landing page clicks arrive at to make sure it will do a good job of sales conversion.
Pesach Lattin of Spyretech warns if you do get a CPM order these days, you should double check that the actual advertiser is paying CPM, because some dishonest media brokers are hoping to make extra money by misrepresenting CPA/CPC buys as CPMs. If the broker doesn't come out ahead, the publisher is usually stuck
with bad debt.
3. Formats That Sell Best
In the words of Jeff Hirsch, Chief Sales & Marketing Officer at FastClick, "Pop-unders are selling like hotcakes." He advises publishers to only accept pop-under placements that are "implemented responsibly with both user and campaign based frequency capping."
However, several media brokers predict the pop-under's dominance will end shortly. ClickZen CEO Ruchit Shah says, "We've been shying away from the pop-under market because it hasn't been working for most of our clients due to the congestion of these on the Web."
Bob Hanna, SVP Sales at BURST! Media, adds, "I would venture to guess that the pop-under may begin to lose its popularity within the next 4 or 5 months. Pop-unders are primarily being used by high-volume advertisers who are interested in data capture and a low ROI. However, traditional offline advertisers view pop-unders as obtrusive, and largely ignore them as a creative option. As these traditional advertisers continue to migrate to the Internet, their growing presence will likely spell the demise of the pop-under."
Spyretech's Lattin noted that if you are considering selling pop-unders for the very first time, initially you may be able to get a premium price as a "virgin site." (Several bad jokes spring to mind at this point.)
Pop-ups, SUPERSTITIALS(R) and interstitials also got glowing mentions as media formats that sell well, but the biggie almost a dozen media sellers volunteered as a killer app was co-registration. (This makes us almost unbearably cocky because we predicted it six months ago when almost no other journalists deigned to notice the format.)
Mitchel Harad, Cofounder& CEO of GetRelevant (a media brokerage that specializes in co-registration sales), told us who's buying it, "Consumer finance and magazine publishing continue to be our two largest customer constituencies, and both industries continue to increase their spending with us. We have begun doing a noteworthy amount of business with catalogers and are seeing rapid growth in test campaigns from political and nonprofit organizations eager to better leverage online marketing as a fund-raising tool. Membership clubs and other direct marketers seeking cost-per-sale pricing are exhibiting heavy demand, however, many are seeking unrealistic pricing or results, making us very selective in accepting these types of campaigns."
The second most mentioned media sale was email newsletter ads. These are getting hotter, possibly because they are highly targetable, and readers may be more likely to open a newsletter than a straight marketing blast in their inbox. Plus, research released by Opt-In News in Spring 2001 revealed that Internet users are at least four times more likely to click on a newsletter ad as they are on a banner.
To back this up, Opt-Influence's Kellner revealed that some of the network's 300+ newsletter publisher members had their best direct-to-advertiser sales month of the year so far in August 2001.
That's not to say banners aren't still selling, albeit at rock-bottom rates. While, as Richard Kahn of AdOrigin.com says, "The old reliable 468x60 still remains the most sought after size", skyscrapers have proven to be the most popular of the 'new' IAB formats. BURST! Media's Hanna notes, "Skyscrapers are on today's 'creative-du-jour' list." However, he cautions that you may get far more enquiries than actual sales. This may be due to the fact that, as AdDynamix's Cranston notes, there's still a lack of skyscraper inventory. If there's not enough inventory available for campaign rollout, most advertisers won't both to test the format, especially ones whose agencies charge a pretty penny for skyscraper creative.
Upfront creative costs are another factor holding back rich media now as well, although most marketers yearn to test it. In this economic downturn, folks tend to test the cheap stuff first even though the pricier stuff may pay off bigger in the long term. For fairly obvious reasons, the entertainment industry is one of the few that's really jumping whole hog into rich media now.
Last, but not least, several media sellers say premium co-brand-style sponsorships are definitely still hot. Mike Lennon, CEO of Shoxygen Sports, says, "We consistently get requests from advertisers looking to 'go beyond the banner' where they can sponsor a section of a site, essentially 'owning' a section. Advertisers get great results by combining this with new, larger ad formats." ClickZen's Shah agrees, "There are a surprising number of clients who are pursuing sponsorships on high-end properties."
4. Sought-After Demographics and Content Topics
Real Media's Mark Naples confirms "advertisers are willing to pay small premiums for both demographic and geographic targeting." In fact, according to a wide variety of sources on both the media buying and selling sides, it appears that run-of-network buys, no matter how technologically 'optimized', are slowly yielding ground to media buys targeting surfers by demographic, geographic and/or content niche. Having a human being handpick media buys is coming into fashion again.
Fueled, no doubt, by this summer's pay-per-click search engine advertising trend, contextual ad buys based on internal site search results or just on the content in a particular article, are getting hotter as well. Northern Lights recently signed on to have B-to-B Works sell ads tied to Northern Lights' internal site search results, and B-to-B Works expects more sites to follow suit. Jonathan Derise, VP Online Sales for Z'onfire, says they've been "VERY successful in selling targeted keyword and contextual content advertising."
CyberReps' Warsinske says that sub-category sites such as technology sites focusing on enterprise content or financial sites focusing on healthcare are doing well now because, "it isn't enough to have a broad category affinity, it has to be more specific to the individual's target."
He is one of several experts to agree that automotive sites will be strong sellers in 2002. B-to-B Works' Breen Vogel says her sales team sees demand for access to CXOs as well as very targeted niches in certain verticals "such as physicians in Healthcare." ClickZen's Shah says, "The big niche that everyone has been trying to reach is just plain old blue collar workers for their B2C clients, and of course IT style sites for B-to-B ."
Everyone agrees, including site and newsletter ad sales people, that the travel category was shaping up to be one of the hottest sellers for Fall 2001. Now, of course, it's not.
L90's VP Marketing Lauren Kay says sites need to begin adding data to their media kits that specifies that their visitors are online shoppers, rather than just surfers. She says, "Advertisers want to target users that have made purchases online in the past, and sites that are highly transactional. History of transactions is key data for advertisers." Aside from that, premium content brands are sought after, "Brands want to be associated with brands, and that is why we see sites like Star Wars and PBS Online receive a lot of interest from advertisers."
5. Wireless Ad Demand Grows
Wireless ad sales are following the patterns described above. For example, Steve Root, VP Sales at Advertising.com, says "In wireless we have witnessed an increased demand from segments, such as the automotive industry, looking to reach those consumers earning greater than $100k a year. We have also seen significant interest from consumer products companies looking to test wireless."
Billy Purser from wireless ad network WindWire, says, "With mobile marketing response rates averaging over 3%, WindWire continues to see a growing demand for this medium." Which is probably why he's still able to sell CPM (!) rates of $35-$55. He says happily, "We have been approached by many advertisers regarding a CPA model, but with CPM demand so high we have yet to run a CPA campaign."
6. Conclusion and Forecast
Nobody knows what the events of September 11th will do the ad market, although many tell us their gut says ad buys are being delayed rather than canceled altogether. Both the B-to-B and B2C ad markets traditionally see an end of year sales bump as B2C marketers pitch for holiday sales, while B-to-B ers try to influence executives setting budgets for business purchases in the New Year.
However, sales overall are not wonderful and nobody expects them to be wonderful for about another year or so. Plus, no one ever expects them to go back to pre-2000 CPM price points ever again. The tulip fad is over.
Recently several MarketingSherpa readers have written in asking for tips on launching ad sales. Our advice is that this is not the best time to launch into media sales unless you meet at least one of the following conditions:
- You have an in-house sales person who has sold before and has media buyer connections in the industry you're targeting.
- You have zillions of monthly pageviews (or opt-in readers) so even if you have to sell at a very low rate per thousand, it's enough money to be worth your while.
- Your site content is directly related, or involved in, the purchasing decision for a product (such as cars) or service in a marketplace where there are already advertisers with proven budgets spending money online.
- You actually have potential advertisers asking you to sell to them. (Note: just like paid subscribers, people who say they might advertise are a much larger number than those who actually ante up in the end.)
For many niche and smaller content sites, these restrictions may mean today is not the time to enter the ad sales market. You may be better off investing the time and effort, that ad sales take, into another revenue-related project, such as an eBook of your classic site content. In fact, although MarketingSherpa does sell ads in our six newsletters, we've found we can usually get a greater return from house ads for information products in our own Knowledge Store at http://www.sherpastore.com
However, in the longer term, online ad sales will almost certainly be a healthy, profitable industry. We agree with Z'onfire's Derise when he says, "The future looks bright. Keep in mind, advertising dollars follow eyeballs and the Internet is only attracting viewers, not losing them like TV/radio."
7. Related Links: In Alpha Order
Interactive Advertising Bureau