If advertising trends follow a pendulum model, then we’ve swung quite a ways since the dawn of the decade, when venture capital money was being thrown around like tapioca, just to see where it would stick. Commercials like the famous “herding cats” spot during the 2000 Super Bowl sought to publicize brands by creating a generalized buzz, shooting for the widest possible audience regardless of cost. In today’s distressed economy, advertisers are watching every dollar spent, abetted by the Internet’s ability to take targeted advertising to a whole new level. Lead-generation strategies and measurable data are now top priority, and media companies are responding with a slew of new products designed to lure accounts with the promise of maximum return on investment (ROI).
Instant Gratification
Understanding how to make money on the Web today starts with understanding that it is essentially a buyer’s market. Ad agencies working with scant budgets demand measurable results and direct ROI. Strategies based on brand building have (temporarily, at least) been tossed out as inefficient relics of more prosperous times.
“What happens in a recession is people throw the brand out the window, and they want tactical campaigns,” says John McMahon, vice president and group publisher at Questex Media. “Obviously, the Web is set up perfectly for tactical efforts to drive transactions. Not that we don’t do it in print, but it’s not as robust or ROI-focused in print.”
For McMahon, the answer to this penny-pinching mood has been the ability to offer customized marketing “packages,” facilitating access to a target audience at key touch points. Such an approach drives the type of Web products the company is creating for its brands aimed at the travel industry: Luxury Travel Advisor, Five Star Alliance and the venerable Travel Agent family of publications.
“Tactical campaigns are digital programs geared toward common content,” McMahon says. “We’re not single-threaded. If you are in a company like ours where you have the ability to have a lot of different touch points, [you can] take a supplier’s marketing dollars and stretch them a lot further.”
Questex’s Travel Group has social networking products and sponsored e-newsletters aimed at travel crew communities and geographical market segments. The products allow the company to leverage its deep penetration in these markets to offer highly specific data built around lead generation.
Yes, believes Carine Roman, vice president of online operations at Ziff Davis Enterprise—but it will take major moves by dominant Internet players to reverse the trend. The problem today is not pressure on cost per thousand (CPM) rates, she explains. It comes from the stark fact that people no longer want to pay for online advertising per se. “They want to pay for engagements. They want to pay for CPE [cost per engagement] or CPA [cost per action]— which means they are getting the branding, the impressions, for free,” she says.
“Can we reverse that trend? I’d love to, but I don’t have the power to do so,” Roman continues. “Unfortunately, if someone else is offering a lower CPM, I have to do so. There are dozens of ad networks out there that are also bringing the CPM down … [so] in the short term, I do not see the CPM getting any higher.”
She compares payment models based solely on guaranteed response to a TV advertiser demanding they pay only if they get a call in response to a commercial. “That’s what cost per click is,” she says. “The guaranteed response [model] is totally unfair. What if your ad does not bring anything interesting to the client? What if your creative is not good? If I’m bearing the cost of promoting the ad, and you are not giving me any money, that’s not exactly a win-win situation.”
Roman is hopeful, however, that larger players like Google will begin to collaborate more with advertisers, putting the emphasis on maximizing overall value for all sides rather than bargain-basement CPM rates, and she believes this is already starting to happen. She cites recent comments from new AOL CEO Tim Armstrong—who built Google’s advertising model from the ground up before joining Time-Warner/AOL in March—to the effect that ad agencies can be convinced both to pay more and try new forms of online advertising if publishers are willing to share data and strategy.
(Armstrong believes marketers are not paying enough to advertise on AOL, and that this is one of the Web portal’s big problems. “We have to prove to advertisers that our brand is above where it is … [by] giving ad agencies enough insights to actually move the brands to a different degree,” he recently told Ad Age’s Jonah Bloom.)
Questex Media seems to have learned this lesson in terms of dealing with advertisers. “It’s all transparent,” says John McMahon, Questex vice president and group publisher. “[The undervaluing] is starting to change as media companies become more sophisticated with their reporting.” McMahon believes the value of lead generation will serve to tip the scales back in favor of publishers being able to charge higher rates for what is essentially a premium service.
“It depends on the company,” notes Jim Roddy, president of Jameson Publishing. “Too many folks started off by just giving stuff away, and so probably folks that gave stuff away early on because nobody would buy it are suffering from that.” For that reason, Roddy says Jameson has intentionally not been an “early adopter,” instead waiting to embrace proven best practices.
“If you give something away for free rather than charge a nickel for it, they don’t want to pay. But if you’ve always charged them a quarter for it, you’re in a much better position,” he notes, a sentiment echoed by Roman.
As far as adopting a subscription model, “I don’t think we can go back,” Roman says. “For the last 10 years, no one has been paying for content … [so] it will be very hard to reverse to a paid content model. I would be delighted, but a publisher like us, I don’t think we have the leverage to do so.”
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