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6/27/2006
  Are CPM Ads the Answer?

The conventional and not-so-conventional wisdom seems to be building that cost-per-click (CPC) ads are in decline, and that Cost-per-impression (CPM) ads are the better model for the internet.

I guess up is down now. Cost-per-click is being criticized by the likes of Henry Blodget as the wrong model for the blogosphere. (In other news, Henry has signed up with Federated Media - John Batelle's ad network - mostly CPM...)

Does anyone remember 3 short years ago when CPM ads were all washed up? This CPM comeback (sentiment-wise) is driven by backlash against the success of Google and AdSense in shaping the monetization landscape of the internet.

CPM ads comeback (performance-wise) has happened due to macro ad market trends - a strong advertising market overall, and brand advertisers finding success in CPM buys. Unfortunately, CPM still has two major problems:

Accountability of CPM is low because marketers who buy CPM ads generally have much smaller ability to tie campaign spending to dollars generated. And fraud is high - if you think Google has a problem with click fraud, it is NOTHING compared to the regular impression fraud that happens on the CPM side.

Furthermore, CPC and cost-per-acquisition ads (CPA) have built in accountability for direct marketers - you spend more when you make more since you actually can tie spend to revenue.

Upshot: What's old is new again, and the internet is diverse enough to accomodate huge ad spending on many types of media. CPC and CPA have distinct accountability advantages over CPM, so PPC and CPC are not going away, and CPM may be strong but it's not ascendant.

 


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