Posted by Tom Foremski - August 24, 2009
Jim Spanfeller, the outgoing president and CEO of Forbes.com wrote an interesting article about the mistake online publishers make when they price their online ad inventory in an article titled "Publishers Are Killing Web Advertising's Potential With Misguided Pricing" on Paidcontent.com.
...we now know that 16% of web users generate 80% of clicks and that this 16% represents the lower income and education segments of the total user base. Do we really want to be held accountable as an industry by metrics generated by the lowest common denominator and a minority of users to boot? I can't think of too many successful models using these types of metrics.
So this is why online advertising models don't work (for publishers!).
He also doesn't like the use of Internet advertising for demand fulfillment.
These metrics drive the conversation and the core objectives of online advertising away from demand creation (which is basically the definition of advertising) to demand fulfillment or, put another way, direct response. There is nothing wrong with direct response; every other medium has it, and the industry drives huge value for both marketers and media. But direct response is not advertising--it is something different.
It is by allowing such practices that publishers have "vastly reduced their pricing power. They are training the buying community to fixate on the wrong metrics, and for very little near-term return."
Foremski's Take: Good luck on retraining advertisers to go back in time to using advertising for demand creation. That's a model that isn't very trackable -- which is good if you are a publisher.
That's the advantage to advertisers that Internet advertising is trackable, and that it can be used for demand fulfillment. Advertisers always knew half their spend was being wasted now they know which half is being wasted. Why would they go back to a less efficient model?! It's not going to happen.
Forbes has no choice but to play by the rules of online advertising. Even if it persuades a few other publishers to follow its best practices it is not enough. They are all hostage to the practices of their competitors. Why should advertisers pay more, and accept a worse ROI when they don't have to?
Mr Spanfeller does a good job in explaining the dynamics of the online ad industry and its effect on publishers but he hasn't a ghost of a chance of bolting the barn door - the chickens have flown the coop (mashup metaphor #97).Tweet this story Follow @tomforemski
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