Advertising Age has come out with a statistic that says that advertising, especially the CPM based advertising the keeps the gears of Internet content production well oiled is failing. The percentage drop in CPM (cost per thousand impressions) rates is not terribly important, if you’re interested read about it here. What is vastly more important is that these rates will not be going up anytime soon. For content producers the free lunch is over, not because the economy has taken a nose dive, taking big brands and the ad agencies that suckle from them into panic mode — much more importantly, the basic culture of advertiser to content is flawed to the point of breaking.

If I am in the market of buying ads, right now my story looks like this — the brands I represent want me to hit a certain number of impressions. The assumption is that impressions are the only measurable metric related to conversion. The more impressions I can buy, the better my campaign looks in the eyes of the brand manager. As an agency, I get bonus points if those impressions come from a big name, and I get a gold star tattooed to my forearm if they are also really, really cheap.

That means I am looking from huge numbers of cheap impressions from big names.

If I sell ads chances are good I know little to nothing about how much my content is worth. The only metrics readily available to me are my traffic numbers and the only examples of “ad sales” I have at my disposal are from those who are selling those traffic numbers for money through ad networks and rep agencies. I want to make money quickly and effectively (mostly quickly) so the first thing I do is put my content up for auction to the first network that will take me. Since I never take the time to realize what my audience would buy given the opportunity, the only leverage I have is to continuously increase my traffic to try to wring more dollars from the agencies. Which usually serves the double purpose of diluting my audience.

In this role I need to sell as many impressions as I can, as quickly as I can for as much money as I can get.

The basic economics of these two forces just doesn’t work out.

Impressions are nearly unlimited and there will always be someone willing to sell them for cheaper than you will. Since most ad networks work on a “auction” model, as the number of impressions available increases, the overall price per impression is driven down. The end result is that the natural trend will, without fail, be in favor of advertisers who will be able to purchase cheaper and cheaper ads as time goes on even though this impressions will become increasingly less value due to dilution. If you have put your hat in this ring, you’re slowly bleeding yourself to death.

Where’s the alternative?

The hidden truth to all advertising is that I would much rather buy 100 uniques and 75 conversions for $1000 from Joe Schmoe than I would buy 100k uniques and 500 conversions for $10k from Engadget. The problem is that to find a content producer in the first column would take me the better part of my lifetime (trust me, they exist). It’s faster and cheaper for me to play the numbers game rather than search for “engagement,” especially since none of the content producers I am courting have the information to help me. If they did, they’re realize a second truth, if advertising works, like it does in column one, I don’t really care how much money I throw at Joe as long as it’s below my cost of production, like Seth Godin says –

You should know cost per click and revenue per click and be able to make a smart guess about lifetime value of a click. And if that’s positive, buy, buy, buy.

…

How often do you hear the marketing person say, ‘that’s a neat idea, but we don’t have the budget this year’?

Shouldn’t she say, ‘We have an unlimited budget for ads that work’…

What’s necessary is for rep agencies and ad networks to get into the business of helping Advertisers find these diamonds in the rough. Instead of being laser focused on impressions, start recruiting for voice and engagement. Find sites that sell particular types of products effectively and sell the agencies on the ability to convert. Find people who are excited about a brand and offer them a premium rate for exclusive placement.

Good content producers will work with brands that they respect and who pay them well, raising the overall quality of content (because they can focus on building their audience rather than an audience). Advertisers will see vastly improved conversions and overall cheaper cost per campaign because these content producers will see the relationship more like a partnership and less like a change purse. While Advertisers might pay more per impression the impressions will be worth more by far.

My final point will be taken from my Twitter rant on this subject, and it goes out to content producers who want to survive on the web, “If you are going to survive suckling on advertising’s teat, you had better position yourself as a boutique, not a strip mall.”

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