Miscalculated Media Values Harm Industry

Back in the old days, we used to have to make up online media rates out of thin air. We’d take a stab at what we thought was fair (just north of print rates, generally). It turns out we overestimated. The numbers turned out to be too high, not because the media isn’t worth that much — it is — but rather because the supply has become very great.

A lot of media out there goes unsold. It gets soaked up with barter between sites and with internal “house ads,” but any neutral estimate has to hold that even the most successful sites rarely sell out. My personal guess is that about 40 percent of media gets used by a paying customer on a good month on a good site.

The other sites — the middle-market ones that still have great brand names — are probably selling closer to 25 percent of inventory.

Sellers speak of “rate card integrity” as a moral principle, wishing to deviate only slightly from stated rates. But this harms all of us.

When a site decides to sell only 20 percent of its media at a very high price, its revenue may be identical to selling 100 percent of its media at a very low price. In fact, it gets to use the 80 percent of extra impressions for its own marketing and barter purposes. At first, this seems like a good strategy for the site.

But real-life clients now look at this media budget with narrowed eyes. Instead of busting through the price points of other media — making obvious the superiority of online media to print, direct, etc. — we find ourselves wandering around similar price points to traditional media.

Where we once had the opportunity to blow past media budgets of the older media, we now are stuck nickel-and- diming around the levels of outdoor advertising and radio. We haven’t yet begun to threaten print.

There has been no dam bursting in media budgets. We’ve been doing a good job of growing online budgets steadily, but where’s the hand hitting the forehead, the oh-my-gosh-buy-me-more-of-that reaction? It’s been sapped by web sites playing the percentages.

This suggests buyers should not be rewarding the larger sites with media dollars at $10 to $20 CPMs. It’s not important enough to include big search engine names on a media list just for the sake of client recognition.

Instead, we should be rewarding the sites that are employing all of their media — at much lower rates. This is what will allow the online media industry to blow by traditional media.