It is no secret that the ad economy is currently weak. Even the rosiest of estimates have paired back general ad spending, from anywhere to up a small % year over year to down. There is no question that as we head into the 2nd Quarter of 2009, CPM rates will continue to come under pressure.
Premium content sites have begun to surface some evidence on their strategy on how to weather the storm, by introducing “paid for” services. In the last 24 hours, The Wall Street Journal announced their Niche content subscription plans, and the Washington Post announced their “paid for” image service. There is precedent for this corporate behavior, this very same cycle (ad market collapse / increase in paid services) happened in back in the 1999-2000.
But what are sites doing that don’t have a premium offering that is compelling enough to bundle into a “paid for” service?
These are the advertising revenue pure play sites, which represent the vast majority of web publishers today. This is especially true within the social media/community/blogger category.
It is widely believed that these pure play sites are coping by simply adding more advertising placements and ad inventory. Short term, the net effect is that if you add an ad placement, you can generate extra revenue against that page/site. The formula is quite simple, let’s say a site had two placements before the downturn which dropped their CPM’s by 33%, without any traffic growth by adding a 3rd ad placement the site could generate 33% more revenue (than just allowing for 2 ad placements) which would equalize the raw ad revenue generation that the site delivers. Seems simple right? Not exactly.
If every site simply added an additional ad placement, the pool of available inventory would grow and the laws of supply and demand would take hold and CPM pressure would drive rates down, hypothetically by the same % that supply increased. The ad revenue flowing into the online ad economy is a constant in the equation.
So what is the answer? TIME
The answer is for publishers is to look at the value of the ad placements in terms of time that the ad was exposed to a consumer. Just recently Lotame, a Social Media Data company released some great data about the average exposure time of three of the most popular ad placements; the rectangle, the skyscraper, and the leaderboard. The results of the study showed that the rectangle sized ad had a clear advantage staying visible on a consumers screen for 13 seconds, 2.5 times more than leaderboards (5.4 seconds), and 6.8 times more than skyscrappers (1.9 Seconds).
From a marketers perspective, these are big findings. If the basic premise of online marketing is to drive brand imagery, create consumer demand, and propel purchase intent, then the ad that stays visible for longer in front of a consumer is more valuable.
If a publisher were to plan ad placements based on the data that we released, then theoretically a publisher might actually be able to reduce the number of ads served on a page, and get an increased effectiveness of the ones that remained. To illustrate, if a web site currently has an equal mix of rectangle, skyscrapper, and leaderboard ads on every page, and they move to two rectangle ads, the time that those two ads would be visible to a consumer would be 26 seconds, up 28% from 20.3 total exposure seconds with the current three ad placements per page.
By looking at the time spent metrics, a publisher can drive value for marketers (and marketers will reward publishers with higher CPMs), remove clutter from current web page designs, and drive greater and more efficient revenue. It is a win, win, win, scenario.