Monday, April 6, 2009

Pricing Revolution in Online Advertising

As demographic profiling and behavioral targeting becoming increasingly more sophisticated, the CPMs (cost per thousand impressions) charged by online publishers should continue to drop (i.e. why pay the WSJ $60 per CPM when you can reach the exact target for $3 per CPM on a less-trafficked website). Google through its acquisition of Doubleclick, Quantcast, Valueclick (VCLK), and ComScore (SCOR) are amongst the best positioned companies to benefit from this evolution in the online media world.

This BusinessWeek article entitled (“A Pricing Revolution Looms in Online Advertising”) describes the phenomenon of “retargeting” whereby web users receive similar ads as they bounce from one website to another. The strategy better targets the advertiser’s ideal customer at a substantially lower cost than the traditional model of buying advertising space on a highly trafficked and specifically targeted website.

Here is a snippet of the article below:
Marketers can use these tools to reduce online ad costs dramatically. Say your company sells "Bidgets," a luxury product. Ordinarily you'd run banner ads on FancyOldSite.com, which reaches your target audience of men and women who earn more than $150,000 a year. The ads are expensive—say $60 per thousand impressions—but they reach your ideal audience.

You might instead embed a snippet of code in the banners that run on FancyOldSite.com. This places so-called cookies on the computers of everyone who sees the ad so you can track them when they visit other Web sites. That's where retargeting kicks in. Every time a former FancyOldSite.com reader who saw your ad visits other Web sites, your Bidget banner ads pop up again. The banner ads reappear because the cookie on that computer flags a retargeting "network" of thousands of sites, saying "This desirable reader is back." These new ads are cheap—$3 CPM—but they reach exactly the same audience.

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