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.