With the recent economic downturn, many advertisers have begun paying greater attention to optimizing advertising budgets and more closely analyzing campaign ROIs. Not only have we seen this impacting traditional offline media outlets, such as magazines and newspapers, but it has had an even greater impact on internet companies whose revenues rely solely on the sale of banner advertisements.
As some internet companies are coming to grips with lower advertising demand, they are beginning to accept less favorable contracts from online advertisers. For many, this means the transition from CPM-based advertising to cost-per-action (CPA) rates. Because CPA campaigns only pay advertisers when an action is completed, much more risk is assumed by the internet company and also makes them reliant on the quality of the advertisement and advertised product. For those that haven’t switched to CPA campaigns, many have begun accepting much lower CPM rates.
For a much smaller group of internet properties, the recession has not affected the ability to demand extremely high CPM rates. Recently, it was reported that Cannon is paying as much as $275 CPM to video advertise its products in Thrillist, an email newsletter that is distributed to 1 million subscribers. Certainly the highly targeted demographics of Thrillist subscribers allows the company to charge a premium for its advertisements, but many still question whether the premium paid will generate enough sales to make it worthwhile.
In the coming months, as the economy begins to rebound, it will be interesting to observe whether companies will return to higher CPM rates or if online advertising rates will remain less favorable.
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