Re: UKNM: Advertising might actually be dead

[Tom Hukins]

Mat Morrison wrote, in reply to my post:

>>I don't see why sites which accept advertising can't be more flexible.

>>Is there a reason why all the ads they display need to be a given size?

>

>Let's say we accept this reasoning. How do we value banners? Is a larger 

>banner more valuable than a smaller? 468x60 pretty much approximates to 

>10% of screen estate of the old 640x480 screens. Should we see this as a 

>benchmark against which to arrange the CPM? 

>

>Standardisation allows media-owners/audience centres to price and sell 

>comparable media.


How do we value banners? The answer to this is simple: buyers will be

willing to pay anything less than their cost per objective. If an

impression is worth X, then buyers will pay anything less than X. Sellers

will be willing to accept anything more than the cost of hosting the

banners. Ideally they will sell at a price which makes them a profit, but

if this isn't possible they'll sell at the highest price, provided that

price is less than the cost of hosting the advert. Such costs include ad

software, invoicing, the devaluation of the site (adverts inconvenience

visitors who perceive the site less favourably, weaking the site's brand),

etc.


The market for Internet advertising is very close to what economists call a

perfect market. A large number of buyers and sellers mean individual firms

do not have enough power to influence the market in any way. Anyone can

enter the market; the transactional costs of buying and selling advertising

can be extremely low. Well-designed ad server software allows low-volume,

low-cost campaigns to be set up easily. Innovative ad networks such as

SAFE-Audit <URL:http://www.safe-audit.com/> allow even the smallest sites

to profit from advertising.


Those who buy advertising can estimate the value of that advertising by

running low-volume test campaigns. Statistics for click-through and

impressions can be monitored in real-time. The effects on sales and

branding take more time to calculate, but they are equally measurable

whether standard banner sizes are adhered to or not.


So, if we can estimate the value of each campaign, why do we need

standardisation? I believe that if advertisers innovate and break out of

the standards they will be able to come up with much more compelling

creative which will do its job more effectively. This will increase the

value of Internet advertising, benefitting sides of the industry (buyers

and sellers).


Traditional media advertising relies on buyers arriving at some vague

notion of the cost per objective and hoping they're right. The Internet

allows advertisers to test different sites, different creative and

different targetting.


Furthermore, sellers can test advertisements too. Whenever they don't enter

into an exclusivity agreement, they can test different banners and show

those which pay them the most if payment is made by click-through or sale.

Statistics can be monitored in real-time by the ad server software. They

can also respond to their visitors' reactions, so if a 500K Shockwave ad

drives visitors away they can stop showing it.


Thus, the most effective adverts are shown, and the least effective aren't.

There is no need for standard ad sizes because they don't benefit anyone.


>Campaigns like, say the Levi's I-Candy boxes do move away from the 

>traditional model -- but do they move so far as to be effectively 

>sponsorship? Can we really buy the same sort of targeting, frequency 

>capping, audience tracking and adjustment with this sort of campaign as 

>we can with a "standard" banner?

>

>Paradoxically, I believe, standardisation allows us much more 

>flexibility in the way we plan and buy our campaigns than your 

>free-and-easy approach.


Only if ad space buyers and sellers can't be bothered to measure the effect

of their campaigns. The value of a 468x60 banner can vary so rapidly that

to take it as being constant is probably a bad idea.


Regards,

Tom


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