The Race to the Bottom
Desperation for sales is taking a toll on revenue.
It seems as if media companies are falling over one another in a race to price themselves out of business. First, print, with a few exceptions like SD Times, is in a death spiral. But it seems that media companies jumping on the online bandwagon are so desperate for sales that theyâ€™re pricing themselves into oblivion.
Because there are very low barriers to entry on the Internet there are often dozens or even hundreds of places that an advertiser MIGHT find a buyer. Which Web sites are best? I dunno, thinks the ad buyer, who then concludes that it must be the ones that generate the most clicks or have lower prices.
What about the hundreds of blogs or Web sites that might be â€śon topic?â€ť The popular solution is the so-called ad network, which acts like a broker. Advertisers place one banner with an ad network, and itâ€™ll appear on hundreds of Web sites. Meanwhile, Web site owners can sell â€śinventoryâ€ť of banner spots via the ad network with no effortâ€”especially leftover, or remnant, space.
When Web sites with their carefully crafted content, expensive designs and unique readers become just another member of an ad network, do you know what they are? A commodity. An eyeball aggregator. Nothing more.
When youâ€™re part of an ad network, the lowest price wins every time. Therefore, ad networks, with the willing cooperation of publishers and advertisers, are slashing prices in an effort to compete with one another. A network recently told me their standard CPM for remnant space was dropping to 50 CENTS.Â Thatâ€™s one million impressions generating $500 in revenue. Who can stay in business for that?
Maybe Rupert Murdoch figured this out when he said weâ€™re not giving content away for free anymore. Everyone says lead-gen is the answerâ€”I donâ€™t think so. Stay tuned.
Ted Bahr is CEO of BZ Media.