Low CPM Rates Sow Discontent Among Publishers, Ad Networks
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Any cultural psychologist will agree that in times of crisis or concern, tempers flare and folks begin pointing fingers. In revolutionary France, that meant throwing up barricades and taking up arms. But today, the current woes facing the online advertising industry -- while significantly less bloody -- are nevertheless a source of worry.
Both publishers and ad networks are renewing their focus on maximizing income amid decreasing media revenues and sinking CPM rates. And for many, that means taking a hard look at who's serving which ads, who's representing which sites, and how everyone is being paid. For publishers using ad networks, that means reconsidering their partnerships with networks and representation firms.
Some think it could be the start of something revolutionary.
Ad networks often provide a valuable service to sites by allowing them to outsource most, of not all, of their ad sales. But the way networks group their inventory with those of related sites -- which makes it easier to promote the opportunity to advertisers -- doesn't show off publishers' content to the best advantage, or so think publishers. That disagreement, heightened by the pressures caused by low CPMs, seems to be a recipe for discontent and defection.
Sharing the individualistic philosophy is Phase2Media, whose founder, Richard Glassberg, said he started the single-site representation firm simply because "I've never believed in the network model."
"The whole philosophy of this company is that advertisers buy brands," said Glassberg, the company's chairman and chief executive. "And advertisers don't want to buy a bundled network of inventory it doesn't know. We started [Phase2Media] for that reason, and we've been phenomenally successful. We don't have a network buy or a network product."
Some very rough math suggests that DoubleClick earned an average CPM rate of $8.90 last quarter, based on its Media unit's revenue of $60.4 million, and a total of 185 impressions served. The actual average CPM is even likely to be lower, since DoubleClick doesn't report impressions served on its ad network separately from those served by its outsourced DART customers, or on its e-mail network.
Spokespeople from DoubleClick did not return calls or e-mails seeking comment by press time.
"What's happening is that lots of sites are, with the downturn in dot-com spending, asking themselves if it's worth it to be represented and sold as part of network of 200-300 other sites," said John Denny, vice president for marketing and business development for Winstar Interactive, which said its CPMs average about $20 across all of its member sites.
The catch is that Winstar and Phase2Media won't take on just any client -- just sites which they see as having established brands. Winstar recently concluded deals with Entrepreneur.com, and Fodors.com, both of which came to Winstar Interactive from larger ad networks -- Engage and DoubleClick, respectively.
It's the same story at Phase2Media, which Glassberg said saw an average CPM of about $12 during third quarter.
"The ad networks' publishers are coming to us," he said. "We've turned down about 650 sites in last 18 months. Since these guys started collapsing, we've turned down 200 in last 60 days. I don't believe that there's a lot of desire for the networks. I believe the advertisers and marketers don't buy the networks for their premium advertising buy. The reason people use us is that we sell them as a site."
Entrepreneur.com joined Winstar from ad network Engage, which has recently undergone two major rest