CPM, RSS, and the Lego City
A few days ago I posted Internet: Your Lego City and it has resulted in some interesting exchanges and I think I need to clarify a few things because as always, I kept a lot hidden in my head without knowing about it. That’s another thing about writing your own blog that is very important: It helps you clarify your thoughts! In a sense I am trying to publish my embrained knowledge and externalize my tacit knowledge similar to Nonaka and Takeuchi’s SECI model. So bare with me for a few more thoughts.
First of all, as Thijs noticed in a comment, what I am trying to do is get some new conceptual model built for thinking about internet advertising and how RSS Readers like Bloglines provide a huge opportunity. They will become my Lego like built Internet City where I live in and marketers will need to try to break into that. I make up my newspaper and potentially my street within this RSS reader, in a lot more powerful way than in eMail. eMail is a communication medium while RSS is just an access medium, enabling communication as one potential additional step.
Another item was that the article seemed to indicate that I think CPM is the right way to place advertisements on the internet and I have to say that this is far from the case. I am a true believer in performance driven advertisement, thinking that Google’s AdWords is not going far enough to integrate the value chain involved, especially for micromarketing in the long tail. For anyone to advertise via a syndicator on a large quantity of blogs, with uncontrollable content, they need to move the accountability further to the syndicator away from themselves. If you go as far as live time value models, you do not anymore need to worry too much about where your ad runs. If I pay for a placement, then I want to know where that placement is, because I am paying for the control among other things.
Once I go to the performance marketing side, a big company will need to understand that they are relinquishing control in favor of moving accountability to the web site or syndicator. In performance advertising the ads need to be where their performance is best, but they also need to be context unsensitive because this would make placements scare. A lot of people might want to try driving a BMW independent of whether they are just reading an article about the brand or cars in general. If I have subscribed to an RSS feed for cars auctions, I am surely open for ads about cars when reading about the latest news about Apple.
This does not remove the need though for a web site to measure their ads on a CPM basis. If I look to optimize my placements on a web site I will do that in a CPM manner. Google does that with AdSense through their CTR*CPC calculation which is nothing else than a CPM. So no matter how I build my performance model, I will need to understand that the web site should always calculate in CPM.
We also need to find a good CPM price (as a calculation from a performance based placement) for web sites and Aggregators. The list provided in the last article provides a good view on what that price might be. At the moment the CPM based prices are just too high for a performance based placement to work, and that means that there is a big intangible value attached to the placement, mostly called branding, but which could also be repeat customers, world-of-mouth enabled through it, and so on.
What we need there is something like Tobin’s q in economy. The performance value (book value) will diverge from the brand value (market value) of the placement. A high branding property might have a Tobin’s q of 3, meaning that if I can pay a CPM of €3 based on performance measures directly attached to it, I should charge €9 for the placement because that’s its value.
This obviously needs some more thinking, and especially the (new) last bit about Tobin’s q is nowhere near thought through or that number anywhere easy to establish. But it would be very cool. If you had the web site that has the connectors, the multipliers, that tell all their friends. Your Tobin’s q would be higher. The web site owner would decide what their q is.