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Summary:

Jim Spanfeller is the outgoing president and CEO of Forbes.com. He is also treasurer of the Online Publishers Association and chairman emeri…

Jim Spanfeller

Jim Spanfeller is the outgoing president and CEO of Forbes.com. He is also treasurer of the Online Publishers Association and chairman emeritus of the Interactive Advertising Bureau.

How is ad pricing different online and offline? Fundamentally, it isn

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  1. When publishers start actually selling audiences and their tendencies (publishers do have "vast amounts of information about their user base" that expires unused every second) instead of continuing to sell the adjacency angle for premiums, their remnant inventory won't be an issue.

  2. Amen!

  3. <i>For example, we now know that 16% of web users generate 80% of clicks and that this 16% represents the lower income and education segments of the total user base. Do we really want to be held accountable as an industry by metrics generated by the lowest common denominator and a minority of users to boot? I can’t think of too many successful models using these types of metrics.</i>

    Shouldn't this be a clue that web advertising is being adopted mostly by the uneducated and gullible?

    In my opinion, the true misguided notion is still trying to make web advertising legit after 10+ years instead of grasping the fact web is a different animal and a new approch to marketing science must come into play. Zima banner ads are played out….

    Mommy bloggers writing narratives on a product/service is more potent than a banner ad. Discussions on a social network about an upcoming movie is more potent than a banner ad. The ability to scan content and return contextual referrals is more powerful than a banner ad. The ability to tie a product into a twitter #subject tag at the moment is more powerful than a banner ad.

    Contextual analysis, social trending patterns, business intelligence – again, we are in a new paradigm…

  4. Mr Spanfeller doesn't like the demographics revealed by the metrics therefore publishers shouldn't price according to what the metrics reveal. Unbelievable.

    And rolling back to "demand creation" isn't going to happen. Why would advertisers agree to a pricing model which would cost them more money with a worse ROI.

    He has written a good analysis of why ad pricing is in the dumps but he hasn't a ghost of a chance of bolting the barn door – the chickens have flown the coop (mashup metaphor #97).

  5. Ian Betteridge Tuesday, August 25, 2009

    Tom says: "And rolling back to “demand creation” isn’t going to happen. Why would advertisers agree to a pricing model which would cost them more money with a worse ROI."

    Because it doesn't actually have a "worse" return on ROI?

    The problem is that online advertising measures one thing: instant sales. It's great at that, which is why it's so seductive. But that's also the most promiscuous form of sale, as it doesn't build any long-term relationship with the brand. For some brands, that doesn't matter – but for others, it matters a lot.

  6. While I agree with a majority of points that Mr. Spanfeller is making about publisher pricing methodology, I completely disagree with his comparison to the airline industry…

    "The fact that we’re relying on methods developed by an industry (the airline business) that has to date not made any money in the aggregate is scary to say the least."

    Having spent over 12 years in the airline industry managing various yield mgmt. groups and now working within online media at a large publisher, I can attest to a number of things that we can in fact learn from an industry that has evolved over the past 20+ years to a place that is defined by:

    common data practices and technology platforms, demand segmentation and revenue maximization, efficient marketplaces with numerous distribution channels that promote the effective buying and selling of seats, the list goes on…

    This evolution required a significant amount of investment in technology, people and vision on behalf of all suppliers (aka airlines or in this case — publishers) in addition to having to adapt their business to address the demise of the travel agency and the rise of Online Travel Agencies which can be directly compared to the advent of Ad Networks in online media challenging the relationship balance between consumer, buyer and seller.

    Again, Mr. Spanfeller is indeed correct about the fact that the airline industry has not made money in aggregate, but I also don't believe that consumers would rather go back to having to pick up the phone to call a travel agent in order research and book travel…

    Evolution is underway (and fast) and requires all of us to look forward/backward and across industries as we continue to adapt for success.

  7. Citing an industry average of clicks is a useless stat…when creatives and offers begin to appeal to one's demographic audience, then they will click as well…

  8. Cord Silverstein Tuesday, August 25, 2009

    Mr. Spanfeller, you raise a number of interesting points, but I have to disagree with your premise. Ad prices are dropping because they have not shown real value to the buyers. Online advertising has not been able to show true ROI.

    I also believe that your "study" on purchases through ad networks is not a real apple to apple comparison. Yes, by purchasing through an ad network, an advertiser can pay less, but I also believe the other factor is the customer service the advertiser receives from the network. Publishers want online advertisers to pay premium prices than they should also provide premium service to the buyers. We constantly run into communication and technical issues when buying directly from a publisher which we do not have with the ad networks.

    I think the bottom line is that to get where you want to go, publishers are going to have to make greater investments in technology and personnel to allow advertisers to better integrate and engage with their readers. When publishers begin to do this, they will prove their value and be able to charge what you believe they are worth.

  9. Thanks for taking several hundred words to state the obvious: premium publishers should not offer remnant to networks and clicks are a poor measure of online ad effectiveness. Groundbreaking!

  10. There are certainly some salient points here, but I think what you've missed is understanding of the metrics unique to online advertising that can lead to a better ROI for branding campaigns (since you correctly pointed out the failing of click through rates).

    Once you throw out clicks, and devalue impressions (because an impression is really a measure of the ad server placing the ad, whether the user saw the ad for 30 seconds, 1 second, or 0 seconds because it was below the fold), you have to look at what's left.

    It may seem strange, but I think online advertising should start looking at things like reach and frequency, and use it's capability to qualify those with time visible, page position, share of voice, etc. Once we start looking at the right metrics, branding ROI can be calculated to some degree.

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