Advertising Continues to be Growth Business
AdKnowledge eAnalytics, the strategic analysis arm of Engage Technologies
(NASDAQ: ENGA), has issued a quarterly review of online advertising. Engage
is a subsidiary of CMGI (NASDAQ: CMGI). The report indicates that the
trend toward stabilization of the CPM (cost per thousand impressions)
rate, noticed in its annual report issued in February (see TEC article
Makes It Up in Volume), continues. The average CPM dropped sixteen
cents from $33.75 to $33.59; on a percentage basis that was about half
the decrease of the previous quarter. Simultaneously, the number of sites
seeking advertising rose from 3792 to 4070; this translates into adding
one new site that accepts ads every eight hours.
unexpected result came from examining the history of surfers who had gotten
to an advertiser's web site and taken some action, such as doing a search
or buying a product - such actions are called conversions. The study showed
that fewer conversion events occur after a user clicks on an ad than occur
at some time subsequent to a user viewing an ad (24% of total conversions
vs. 32%). Most conversions, 44% of the total, come from repeat customers
If clickthroughs are not the most important source of conversions, there
may be a decline in the number of advertisers willing to pay on a per
clickthrough basis. This is not the dominant way that advertisers pay
for exposures but is frequently touted as a more effective way to represent
the value that advertisers get. This study suggests otherwise. Advertisers
would ultimately like to pay only for conversions, but these results suggest
that it would be difficult to implement such a scheme.
A related effect of this study (if, indeed, anyone reads studies) should
be a slowdown in the move to develop rich media advertising - specifically
the style in which customers can complete a transaction within an ad.
With only a quarter of conversions deriving from clickthroughs, there
may be better ways to spend money - most likely by enhancing brand awareness
- than on doing more with the clickthrough experience.
Users may want to rethink their advertising strategy in view of these
results. The most important conclusions are: (1) the ROI of advertising
is higher than previously assumed, and (2) customers tend to return. This
supports the message provided by the leading edge CRM vendors, that the
real value is in retaining customers with excellent service and personalization.
Users may want to think of their advertising and CRM expenditures as coming
from the same bucket, and look for ways to optimize across all user experiences.