Econsultancy have published figures which kind of confirm what I’ve long suspected: CPM costs for most websites have been overpriced and are now facing what we euphemistically call “a correction”. CPM takes its cue from the traditional media advertising models of ‘reach’ and ‘demographic.’ While that might be all that’s available for a TV channel or dead-tree magazine, it has hardly any relevancy in the online world where direct response can be accurately measured, regardless of other factors. I’m always surprised to see advertisers selling space at high prices in spots that are, at best, marginal. Sure a lot of them made hay in the last few benign years, but the whole CPM model is going to come under massive pressure over the next 18 months.
What will this mean for online publishers? Most obviously it will mean a reduction in revenues that will bring pressure on them in various ways and it will be very interesting to see how they react. Sites that are basically reformatted versions of print titles will be, I suspect, too wedded to the CPM model to change and will scale back their operations instead – trimming things like forums and blogs and focussing on a straight rerun of their print issue. While in the long term, this might be harmful to their presence, it will at least buy them breathing space while they restructure their operations for a new, more realistic model on the other side of the recession.
Smaller sites will find it very difficult to weather the storm and there will be a lot of fatalities.
Smarter operators will begin to look away from CPM and explore PPC models or affiliate deals. Even so, that will probably mean contracting revenue streams because a full order book for slots costed on CPM is a more predictable revenue stream for an operation with a fixed cost base. As a side effect, this might lead to a sharing of cost base through syndication rather than investment in original content.
For advertisers too, the watchword for 2009 is going to be ROI. The fact that a banner has been seen by millions will mean jack shit to an MD looking down the barrel of falling sales. The most measurable and controllable routes are going to look much tastier than nebulous branding concerns and budget will naturally move to PPC. Again, while big organisations can probably afford a hit to maintain their brand presence, smaller operators – particular ecommerce sites – will find the prospect of paying through the nose for mere ‘exposure’ to be a much less attractive option.
So we kind of have a perfect storm brewing here in which the needs of advertisers and publishers are going to come into conflict. The big winners will be sites with big enough visitor numbers and attractive enough advertising slots to offer PPC models to advertisers. For niche publishers, the pressures will be much greater and will likely mean cutbacks in investment in content in order to support lower CPM to keep advertisers coming in. Of course, cutting on content for a niche publisher is itself suicidal so we’re talking Rock/Hard Place for a lot of these guys. For me, that all spells: consolidation. Expect big media operators to weather the storm on a reduced cost base and perhaps syndicate content from smaller outlets who are struggling to attract advertising revenue.
Either way, CPM looks a lot less attractive in 09 than it did even 6 months ago and the PPC/affiliate models that have served other sectors so well are going to gain traction in publishing.