Never has something so valuable been worth so little. Never in the history of media has a still new medium had the vast majority of its inventory valued at zero. Such is the state of online advertising. The latest click-through rates for online media sit at .09%. Given that click-through rates serve as the foundation for how the majority of online inventory is valued, this means that 15 years after the launch of the commercial Web, 99.91% of online inventory is worth nothing. Pricing online advertising inventory based on the number of people who click ads is the equivalent of pricing billboard’s based on the number of cars who honk when they drive by. Literally.
So how the hell did we take one of-if not the-most valuable mediums ever created and set the value of the audience generated; other than their physical click-through reactions, as effectively worthless? More importantly is this it? The 100′s of billions of impressions delivered online will only be valid if someone clicks, likes or in some way socially shares? Perhaps. But I don’t think so.
The unprecedented power of search technology overwhelmed any other forms of measurement and the entire ecosystem of the first and second waves of the Internet were built around direct-marketing models. This created a massive disruption that destroyed many parts of general media and sent an entire generation of online media into the death spiral of gaming out search engines. Sites that look like cars at a NASCAR race, drive by traffic, ever increasing audience costs and sketchy demographics followed. As did the massive and in many cases devastating swings in audience based on Google’s shifting algorithm…always given cute and unassuming names like Penguin :).
We are at a fascinating and crucial inflection point in the maturation of online media. Marketers are realizing that reach, demographics and engagement are all key and that many of the first generation metrics that defined value in online media simply aren’t relevant today. There are also new measurement systems emerging that show promise at being able to blend the quantitative power of web with qualitative data that reflect interest, affinity and intent, providing a more holistic view of the value of specific online audiences. If you’re running an online media business today however you cannot wait until these services become mainstream. You need to start investing in research that allows you to clearly define the reach, demographics and purchase interests and intentions of your audience. The current syndicated tools are too weak. Being able to differentiate your brand value via detailed demographic and psychographic profiles of the audience you generate is key.
Yes, I know some of the ad agencies won’t easily accept proprietary research as it is challenging to fit the data into the quadrants they use for comparison. Being able to stand out and position the unique value of your brand is the key to your current and future success, however. Online media brands today will only scale if they can either:
- Truly harness a direct marketing metric like click-through’s to make money, which requires massive amounts of traffic, or
- Differentiate their brand based on audience value and charge a commensurately valuable and profitable CPM.
Unless you can do the former you need a clear strategy for the latter. The problem is I see way too many online media businesses today stuck on the bridge between these two positions. In other words, hoping that more cars honk as they drive by their billboards.