Why CPM is Broken and The Tradeshow Connection
There’s been a lot of talk for two years about trying to find CPM (cost per thousand) rates for niche audio and video online. My opinion – don’t bother – CPM is broken for anything other than massive traffic, “everyone-in-the world-visits” sites like Yahoo! and Google. I’ve always said this, but never sat down and explained exactly why – here’s my attempt:
The CPM advertising model doesn’t work for the “niche” sites because CPM (cost per thousand) was designed for large, wide demographic sites like Yahoo! or CNN. Because the demographic is so widespread on those sites, the advertiser uses the CPM model because they know that their actual target market is, for example, only 5% of the audience. CPM is based on the premise that you need to waste your impressions on 95% of the audience in order to get to that 5% you really want to hit.
A niche site targets just that 5% and makes it 100% of their audience so that not one impression is wasted. The old model simply doesn’t fit niche sites. Furthermore, if they tried to use that model, they would be grossly undervaluing their content if they try to compare “apples to apples.”
If I’ve confused everyone enough, here’s a final example to explain my point.
If Gatorade wanted to reach triathletes to promote their new Endurance Hydration Formula, they could certainly advertise on Yahoo! Sports to reach the 2% of the audience of that site who are triathletes and pay $25 CPM. 98% of their marketing would be wasted on the football, baseball, hockey, etc. fans. If Yahoo! Sports gets (just for the sake of round numbers so I don’t have to break out my calculator), one million visitors a day, Gatorade would pay $25,000 for that day to reach the 20,000 triathletes.
If a site like EndurancePlanet.com has an audience of 20,000 triathletes, and tried to use the same $25 CPM, Gatorade would pay just $500 to reach the same exact audience! Yet try telling Gatorade their CPM rate is $1,250 – I’d be laughed out of the conference room! Yet, “apples-to-apples” that’s exactly what they’d spend on a CPM model to reach the same target.
Instead of talking about numbers, the thing to do would be to talk about targets. How much is it going to cost me to reach the exact person I want to reach and ignore everyone I don’t – a CPT (cost-per-target) model – that’s the way to truly compare ad rates across any site. That way, Yahoo! gets paid the same amount to advertise to their one million visitors as EndurancePlanet.com does to reach their 20,000 visitors.
By the way, always thinking of the tradeshow angle, this is exactly how I explain why it costs nearly as much to exhibit at the Podcast and New Media Expo as it does to exhibit at NAB. Their audience is much larger of course, but the attendees at our Expo are 100% the exact target market, while only 5% of NAB attendees are their target.
May 23rd, 2007 at 8:33 pm |
[...] CPM Is DeadPosted on 8:33 pm by Paul Colligan Tim Bourquin makes a great point about why CPM is “broken” over at his blog. [...]
May 24th, 2007 at 5:40 am |
The CPM model is not broken. If you choose to negotiate ad deals based on a CPM that includes all delivered impressions, then so be it. A broadcast TV buyer would never negotiate a buy based on “Household” CPMs, which is what the current all-inclusive Internet CPM equates to. Rather, all established media buyers negotiate on a “Target” CPM. Online media metrics must be comparative to offline media metrics in order to be considered. There is no reason to reinvent the metrics – just do yourself a favor and learn how to negotiate like the rest of the world.
Jeff Hinz
RawVoice
May 24th, 2007 at 6:28 am |
Jeff you know what they say about people who use insults to prove a point – they never had one.
Why the animosity? Ask anyone who negotiates these things and they will tell you trying to get advertisers to compare audiences is challenging.
The last line of your comment shows you have limited experience in this area.
May 24th, 2007 at 12:50 pm |
Tim,
My apologies. Rather than use “yourself” collectively, (which was my intention, but can be misinterpreted) let me restate: “We, the podcasting community”, just need to do ourselves a favor and learn how to negotiate the way the rest of the world does.”
20 years of offline/online media buying has taught me that.
Cheers!
Jeff
May 26th, 2007 at 6:13 am |
[...] Today on one of the blogs I following using my RSS Reader, I found a great post talking about the major issue about CPM, especially when talking about Podcasting. He linked to two things, an article that explains CPM and how it is designed for mass markets where only a small percentage of the consumers are potential customers, and this video below: [...]
June 1st, 2007 at 3:57 am |
[...] On May 23rd Tim Bourquin wrote Why CPM is Broken and Paul Colligan chimed in that CPM Is Dead. [...]
June 27th, 2007 at 10:01 am |
I would agree with you on the point of why it costs the same to exhibit at Podcast and New Media Expo as it does to exhibit at NAB. Furthermore, the actual number of targeted attendees may be the same, but their focus may be completely different. Bigger isn’t always better aka Quality over Quantity. The same applies to CPM. I would rather have a smaller but more effective campaign any day of the week.
- Evan
President
A Smash Hit! Trade Show Displays
http://www.smashhitdisplays.com
July 25th, 2007 at 10:05 am |
To further Evan’s point, I’ve been exhibiting at shows for over 25 years and have found that targetted shows generally provide higher “bang for the buck” — however you need to plan to do more of the smaller shows per year and scale down your booth as well in order to secure the same number of quality prospects. So instead of 1 big annual show we would generally do 4 regional shows and a few tabletop shows with a single sales rep.
–Mike W
President
Impact Displays
http://www.impact-displays.com
October 26th, 2007 at 12:43 pm |
Tim, good post, and a good reminder that a degree in business should include several course in statistics. I would much rather pay $10,000 to exhibit at a “niche” trade show with only 1,000 attendees (of which 70% are true prospects) than save money and pay $5,000 to exhibit at a general trade show with 10,000 attendees (but only 3% are legitimate prospects). At the first show I would have 700 prospects (at $14 each), and at the second show I would have 300 (at $17). Yes, the prices are close, but at the second show my time would be burned up sorting through the 97% of attendees that are not prospects!) Niche marketing economics and rules apply not only to trade shows, but internet marketing as well. Target, Target, Target!
Steve, Pinnacle Trade Show Displays
PS. Shout out to Evan and Mike!
December 15th, 2007 at 11:07 pm |
Tim, great post, Its always great to find a trade show which is targeted to your specific product or services as oppose to one that only covers many different services or products. The overall audience will be smaller for a targeted show or event, but your overall return will be much better. It is always best to sell to a targeted audience.
Dexter
http://www.eldsusa.com
December 28th, 2007 at 10:41 pm |
I would have to agree with you in general for exhibitors who have an indepth knowledge of their customer market. I have found that the larger shows with broader markets may be beneficial to companies or products new to their market. They provide potential customers from many niches and provide exposure to markets that exhibitors may not be aware of.
January 8th, 2008 at 8:09 am |
Well said, Tim. Higher conversion is also the reward of niche marketing in any forum, be it trade shows or the internet. Why waste money on 99% of the people when only 1% will actually be your customers?