Sunday, October 19, 2008

Advertising Paradigm?


With the current housing bubble imploding, and an overall recession (depression?) just getting warmed up within the United States, where it most certainly will not end regardless of how far away you are! It is interesting to see how advertising dollars are being spent by firms to create sales, and promote themselves.
And with any recession across the globe, a tighter money supply leads to innovation or a shift in how items are purchased. With this particular recession coming after huge surges of money spent in the online advertising sector, I think the virtual dollars are going to be spent much more diligently and go through a paradigm shift towards results driven (affiliate) advertising, and steer away from being so dependent on CPC advertising that requires small businesses to understand their metrics and see if the time, money, and effort was well spent of if it is actually costing them money.

There will always be a place for impression based advertising, but as rates have recently fallen through the floor (due in part to small business conservation), we are seeing that this impression strategy not only has lower value than previously conceived, but in fact it's value is really only for large scale companies who want to be that name you think of every time you go shopping such as Coca-Cola, or Pepsi.
This shift is also going to greatly decreased the cost of video advertising as the current model which relies on television primarily is so untargeted and untraceable that is really does not make feasible sense for most businesses to take part in. Companies like Spotrunner are trying to lower the overall barrier to entry, but those types of services will only be complementary services to videos online which will only pay out based upon conversions. This will leave the payouts for each program to be optimized but the publisher of the original content to target visitors for higher revenue, which is completely justified in advance based on a percentage of sale.

These metrics will help foil fraudulent content producers who are artificially driving up click prices, and make a nice pile while generating no real value for their respective advertisers. Companies like Google and Yahoo have technologies in place to help combat this type of fraud, but they are far from perfect and represent a large overhead cost to their business model. Whereas conversion payouts make much more sense as it would no longer be feasible for any publisher to take advantage of this inefficiency.

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