As overall online advertising continues to weaken, display ads are absorbing the brunt of the downturn. So what do you do if you are in the online display business with an ad network that reaches 85,000 mostly-smaller sites that don’t command much of a premium per impression in the first place? You start selling those banner ads on a cost-per-click (CPC) basis, which is exactly what AdBrite started doing today.
CEO Iggy Fanlo says he is seeing a “massive supply-demand imbalance” in the cost-per-impressions (CPM) world. There is just too much display advertising inventory sold on a CPM basis, and advertisers are fleeing to performance-based ads whose effectiveness are easier to measure. In fact, Fanlo expects:
Within 6 months, we will be 50% performance-based on the banner side. I think there are a lot more bidders there.
Today, AdBrite serves up 800 million ad impressions per day (25 billion per month) and has a reach of 90 million people in the U.S. While it’s typical CPMs are between 50 cents and $2, that is still a massive number of ads, and the fact that Fanlo thinks that half of AdBrite’s ads will be sold on a CPC basis within six months could be an indication of where the entire market is going. Or at least the lower end of the market.
Selling banner ads on a CPC basis is not a new idea, but up until now there has not been much of an appetite for it. With banner ads not selling like they used to, all of a sudden the idea has become more appealing. Why now? Fanlo suggests:
We really had some push-back from publishers until we had a supply-demand imbalance. This was a fallback position, much like Google was the fallback in 2001/2002.
AdBrite, which recently laid off 40 percent of it staff, does not want to remain dependent on CPM ads alone.
If this does signal a larger trend, what does that mean for the health of brand advertising on the Web? Typically, brand advertising has been associated with display ads, while direct-response advertising has been more associated with paid-click text ads. Turning display ads into paid-click ads will mean that we are going to be seeing even more direct response ads and fewer ads simply trying to raise brand awareness because the latter is more difficult to measure. Fanlo acknowledges this possibility, but shrugs it off, saying:
I cannot change the world.
Perhaps not. Fanlo is just reacting to what he sees out there in the market. Yet, while brand advertisers might like the idea of CPC advertising, they might be disappointed by the actual results. The people who click on those ads, might not be the consumers they want to reach.