January 5th, 2007

Blogs Have A Big Problem With Small CPMs

by

Chris Anderson highlights the tiny direct cash return that Guy Kawasaki earned on his first year of blogging: $3,350 at a CPM of $1.39. That’s a pitiful CPM by mass media standards — and it’s totally wrong. The way media has traditionally worked, the more “pure” the audience is, the more efficient it is for advertisers to reach that audience, and thus the more they should be willing to pay — that’s the whole rationale for niche media. If you have a product or service targeted at the entrepreneurial community, Guy’s 30,000 readers should be pure gold.

Sites like Forbes.com and BusinessWeek.com can get $100+ CPMs for vaguely defined “business executives.” Why shouldn’t Guy be able to get a $100 CPM from the right advertisers? I’ve heard Rafat Ali say that he won’t take any mainstream consumer advertising on PaidContent — that’s probably because he’s aiming at the high CPMs that his pure niche audience should command, and he doesn’t want to dilute that with low CPM “mass” advertising.

I’m sure the folks at Federated Media, Feedburner Ad Network, and a few others have their sites set squarely on this problem. The reality is that, despite the efficiencies that Google has brought, the online ad market is still rife with imbalances and inefficiencies, which means there’s a significant opportunity for anyone who can correct them.

Chris has a great line buried at the end of his post — he calls the web ad economy a “land of skim milk and honey flavoring.” Indeed.

Comments (17 Responses so far)

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  4. This week I read this article on author Guy Kawasaki getting a CPM of $1.39 compared to the CPM of $100 commanded by sites such as Forbes.com or BusinessWeek.com. It gets me thinking that even though more and more people are spending more and more time on the web, advertisers are

  5. I don’t think the issue is blogs having that problem…the problem is more one of poor ad integration AND AdSense as a bad match for that audience segment.

    AdSense work far better for topics not so closely related to advertising / marketing / internet, where the audience is less aware of the monetization method. With template modifications it is easy to make a blog not look like a blog and/or do a better job of integrating ads.

  6. Aaron, you’re absolutely right, particularly about AdSense. But it’s telling that a smart guy like Guy couldn’t get it right his first year out.

  7. “The reality is that, despite the efficiencies that Google has brought, the online ad market is still rife with imbalances and inefficiencies, which means there’s a significant opportunity for anyone who can correct them.”

    Abso-flipping-lutely! Guy’s blog is in the less than 1% of blogs that have that kind of traffic. The rest of the Internets (55 million blogs) give or take get maybe, maybe 100 visits a day to their blogs.

    So you have Guy’s blog, then the other 55 million, niether of which Adsense really is built for. Adsense works best on content sites, and blogs, yes, but only blogs that fit that “sweet spot” of traffic.

    Read my analysis here in more detail. http://www.blogkits.com/blog/?p=67

    Summary: Guy will end up making between $50-$100k/year with Federated. Adsense would just be a smaller filler if optimized better, but in all honesty, for big blogs like him, it just doesn’t cut the mustard as well as selling their own sponsorships does.

  8. scott
    you’re correct on analyzing our rationale, but that’s only a small part of the rationale of why we don’t want non-endemic advertising. not so much because we have thought out about how it would dilute our CPMs, but mainly because advertisers as part of the ecosystem, and i don’t want to waste our users time with non-relevant advertising, just as i would not waste their time with non-relevant posts.
    the after-effect of that is we get very high CPMs, though the backstory to that is we don’t sell by CPMs, only flat rate monthly sponsorships. for a premium B2B audience, it makes no sense to sell by CPMs.

  9. Rafat, thanks for the clarification — even though you sell by flat rate, which has proven a best practice for niche sites, I’m guessing that many if not most advertisers do the math and know that they are paying high CPMs.

  10. Not to be snarky, but what’s the fascination with cpm’s? I admit, I come from a results background, so I’m biased, but I’ve never understood the cpm way of thinking. It really only benefits high traffic sites, with minimal, if any except branding results for the advertiser.

    For blogs especially, CPM makes zero sense.

  11. [...] Some other good discussions happening here, here and here. The text ad above is a BlogKits Blog Entry Ad Sample. Refresh page to see new ad. [...]

  12. [...] There is a great analysis of it all in the comments at Publishing 2.0: Blogs Have A Big Problem With Small CPMs . [...]

  13. Jim,

    CPM is just a reference point, i.e. PaidContent’s flat rate sponsorships all have a net effective CPM if you just do the math. I think the key issues is that there’s still a meaningful distinction between branding objectives and transactional direct response objectives. Take PaidContent advertisers, for example — how are Jordan Edmiston or DeSilva Philips going to do affiliate marketing? The affiliate gets paid every time they do an M&A deal? It just does work for that kind of business — sure, they could have some form of CPA through a registration for downloading information, but really they just want exposure for their brand.

  14. Yeah, I get all that Scott, of course some people can’t do affiliate marketing.

    I just don’t understand why everything has to “math” back to CPM as some kind of almighty measuring stick? That was my point.

    I suppose it’s just that what people know.

  15. There is certainly a void in the space where high quality viewers exist in small quantities. I know my advertising sponsors would pay quite a bit to be in front of dozens of CEOs but very little to be shown to a million 14 year olds. There appears to be quite a bit of support for the latter but very little automated support for the latter. This is probably why direct sponsorships, even though rather 1.0 in nature, are still quite popular.

  16. [...] Scott Karp adds further thoughts: [...]

  17. Hi guys,

    I come from a totally different market (web publisher). The CPM figures are correct. This is what Adsense produces. It is nothing to do with ad placement, or the “advertising / marketing / internet” market. Much bigger sites do the same (proportionally). Its part of Adsense fault as their cut is 60%-80% of the revenue, and part of the advertiser’s fault, as they still preferring offline traditional advertising than online one; hence the big money still didn’t find its way to online advertising world.

    *A side note, Adsense is almost entirely CPC program, they do however show you stats comparing to what is know as CPM, and they named it ECPM. That doesn’t mean you are getting CPM rates!

    So it doesn’t matter if you are going to blog or build a website with new innovate idea in the near future, these are the rates you can expect, so unless you are getting big amount of traffic don’t quit you day job;)

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