CPM Advertising vs. Revenue Sharing: How To Survive and Prosper
Editor's Note: Irv Brechner brings a unique perspective. He is both a site owner who sells banner ads on his site, and developer of the TransAct! Network, where he oversees a network of thousands of sites that are earning revenues from direct response offers.On my Smart Business Supersite (http://www.smartbiz.com), I am 70% to 100% sold out at CPM rates every month, selling banner ads on at a set price per thousand impressions. What do I do when I have unsold inventory? I fill it with revenue sharing offers, where I receive a set fee for each action a visitor takes, such as generating a lead or filling out a survey. (For this discussion, I want to leave out any transaction that requires a sale to be made.) In this respect, I'm no different than the New York Times and almost every other newspaper, magazine, TV and radio station in the world.
All media have recognized that to maximize revenues, and that is the key phrase, they will have a mix of advertisers, some willing to pay top dollar for the back cover or a Super Bowl spot, others willing to run their commercials at 3 am or have their ads appear on page 182 of the Sunday paper. Similarly, all airlines would rather have a full plane at varying prices than have any empty seats. They have first class passengers willing to pay full fare, all the way down to standbys looking for bargains.
A mix of full-price (i.e., CPM) and discounted price (i.e., revenue sharing) is the formula of choice for media and most other businesses.
A Buyer's Market
There is one major difference between websites and other media: Web advertising is, and always will be, a buyer's market. Because there are tens of billions of impressions available every month, and steadily growing, there will always be much more inventory available than CPM advertisers can purchase.
It will always be a buyer's market, which means the buyers determine how they spend their money. CPM or revenue sharing: it's their choice, not ours. CPM advertising has a much higher cost of selling: presentations to advertising agencies, developing printed materials, etc. Your survival and prosperity is directly related to finding the right model. In most cases, it will be generating revenue from differently priced advertising.
Revenue sharing is much easier because companies like ours bring deals right to you. In a short time look at what's happened. Ziff-Davis, once a major CPM advertiser spending millions now does only revenue sharing deals. CPM really is dying, and in some cases, a very fast death. Big rep firms like DoubleClick and 24/7 have direct response revenue sharing divisions, which means they know that they, and the sites they represent, can't make it on CPM alone. Software companies are developing a model whereby people download a free trial, pay for it, and then receive a "key" to unlock the full version. And these companies pay to get people to try their programs. Over 500 sites have joined LinkShare, a network that offers sites pay-per-action and percentage of sales deals. It costs you very little to test these offers. With 25,000 impressions per offer or so, you can usually determine how much money you'll make.
Sites in our network are earning $5,000, $10,000 and even $20,000 per month running our offers. While they're not getting high CPMs, they are getting good cash flow. We found that banners at the top of the page are not the only approach. You can put banners at the middle or bottom of a page, use mini-banners, employ icons or buttons, or try text links.
One thing is for sure: with hundreds of thousands of sites competing for the same CPM ad dollars, you won't be able to survive only on CPM.
To learn more about TransAct! Network for revenue-sharing options, contact the author at irv@smartbiz.com. Copyright © 1998, Irv Brechner, all rights reserved. Used by permission.
