The Race to the Bottom

It seems to me as if media companies are falling all over one another in a race to price themselves out of business. First, print, with a few exceptions such as SD Times, is in a death spiral. We know that many many publications are on their way out. But it seems that media companies in jumping on the online bandwagon are so desperate for sales – any sales – that they are 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 websites are best?? Dunno, wonders 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 websites that might mention your product or be “on topic?” The popular solution has become the so-called Ad Network, which acts like a broker. Advertisers can place one banner with an Ad Network, and it’ll appear on hundreds of websites. At the opposite end of the business, website owners can sell their “inventory” of banner spots via the Ad Network with no effort – especially leftover, or remnant, space.

Sound like win-win? It’s not. It’s lose-lose.

When websites – 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 you’re part of an Ad Network, a click is a click is a click and the lowest price wins every time. Therefore, the Ad Networks, with the willing cooperation of publishers and advertisers, are slashing prices in an effort to compete with one another. A network I use recently told me their standard CPM (cost per thousand impression) for remnant space was dropping to 50 CENTS. That’s one million impressions generating $500 in revenue. Who can stay in business for that? (We told them they were not to sell any remnant space on our site.)

Plus, the Ad Networks are now being asked to serve up certain sections, pages, niches within their website. Slicing and dicing. This means that a network advertiser will buy fewer impressions – less money for publishers – as it cherry-picks only specific parts of websites. Where does this end?

Maybe Rupert Murdoch has figured this out as he brashly said today, “ENOUGH,” we’re not giving our content away for free anymore: http://bit.ly/14o03e. It’s like a take-off on the New Hampshire state motto: “Give Free and Die” Oh I know, everyone says lead-gen is the answer – I don’t think so. Stay tuned.