E-Media Strategist: 9 Tips for Optimizing Your Online Ad Pricing
Many factors can limit a media company's opportunity for online revenue growth, such as content strategy, audience development strategy, website/e-newsletter design, technical issues, and even your sales philosophy. But almost without fail, I find the No. 1 problem is under- or over-pricing online ad positions. The good news is that optimizing your ad pricing is the least expensive and easiest factor to change to quickly impact revenue growth.
You probably already have established pricing for print, Web and e-mail newsletter advertising, likely based upon your assessment of demand, the competitive landscape and each perceived ad-position's value. The first step to right-sizing your ad rates is to see if you are properly priced among your own channels. There is no better way to do this than to look at the effective CPMs of each. Let's look at a typical business-to-business media property. (See the top set of charts below.)
Many publications still have print as their baseline, so we'll start there. First, note that we really have no idea what the "open rate" of a print magazine is. Despite our reader surveys, it's very unlikely that 100 percent of the magazines we ship are actually opened and read. And of the people who open the magazine, we cannot say that 100 percent of them actually see every ad. Let's give print a generous assumption that 75 percent of the people who receive the magazine see a given ad (15,000 impressions per ad). With an ad rate of $1,500, the effective CPM is thus $100. E-mail newsletters also have a circulation, but unlike print, we can track how many people actually open it. Typical newsletters have a 15-percent open rate, but since open rate is known to be slightly under-reported, let's adjust that to 20-percent. (Open rates on e-mails are calculated based on the delivery of a tracking pixel within the e-mail. If an e-mail client does not display images, or if the e-mail client blocks images—which happens quite often—then the tracking pixel does not load, and the sender never knows that the person opened the e-mail. Thus, open rate is under-reported, but nobody knows by how much because it cannot be tracked.)
Eric Shanfelt is the founding partner of Nearview Media, a consulting firm that helps publishers with their digital revenue, audience and platform development. Eric is a 25-year digital media veteran and has been the Chief Digital Officer for several large publishing companies. You can reach Eric at email@example.com.