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Sunday, May 01, 2005

Think Bigger than That?

Yahoo gives away $1,600!

Doesn't sound very impressive, does it? That's like 50 shares of YHOO. Or a shade below 8 shares of GOOG.

What am I talking about? Well, I can tell you that one of my clients generated 10 million impressions through Google AdWords content targeting in April, and paid about $1,600 in total. (The average CPC was about 10 cents. The CTR was obviously very low.) So, it's possible to garner that many "impressions" for $1,600. I guess that means the effective CPM on this particular part of the AdWords campaign was a rock-bottom $0.16!

Yahoo is holding a contest, giving away 10 million ad impressions to the small businessperson who thinks big, as judged by Sir Richard Branson. When I heard that, I thought: wow! Yahoo is giving away a whole $1,600! Probably not fair, though. These ads could be worth as much as $10,000.

I hope the winner is required to track and quantify the ROI on those ads.

You've got to hand it to Sir Richard. He's still doing his own PR, and a wonderful job he does.

I thought this post was over, but it made something occur to me. Let's circle back... to the third paragraph.

There are advertisers right now getting effective CPM rates on AdWords content targeting ads for as low as $0.16. If people stop clicking, and advertisers keep dropping bids on content, Google could be looking at average effective CPM's across the board well below $1.00 on this program. If a new pricing paradigm weren't instituted, that $0.16 could start looking more like the norm than a crazy bargain. Google and its publisher partners would be making peanuts from content, and the program would go into crisis... if the click fraud issue didn't put it there first.

So what does Google do? They change the pricing mechanism on some of the content. For some large advertisers who can be convinced that millions of impressions can offer competitive advantage or brand lift when purchased en masse, on demand, at certain times of the year, Google is hoping or betting that its new *minimum* bid price of $2.00 CPM on parts of the content program will be attractive. Certainly, if they can create a few bidding wars here and there, they could maintain an average CPM for one side of the program of something like $5.00. If the other side (the CPC side) wound up having an effective CPM of less than $1.00, that $5.00 on the new CPM-based program would really pull up the average. Thus Google has evidently done some serious thinking, not just about how they can extend or improve content targeting or come up with a fairer pricing model, but about how they can squeeze significant additional cash out of their existing content network. Like maybe twice as much in 2006 as they make in 2005. That all depends on advertiser and publisher uptake of the new program. Growth should be slow at first, but like everything Google does, it has a shot of hockey-sticking up after a period of initial reticence by advertisers.

Impressions may be worth $0.16 per thousand, or they may be worth $5.00. The fortunate thing about the AdWords bidding platform is that pricing probably will vary according to demand - by subject matter and publisher. In spite of that, if you look hard at current trends, that $2.00 minimum CPM is still pretty high compared to the effective CPM's on many content campaigns currently running. And we're not even into a bidding war up to $7 and $8 CPM yet.

In fact, if you used that $2.00 as the benchmark for what an impression is worth, Yahoo would in fact be giving away $20,000 in their contest! Sweeet.

Posted by Andrew Goodman




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