The Real Price of Advertising

Audience metrics are the key for publishers to increases prices and advertising revenue. In fact, right now most publishers are charging more than they think for advertising, because who receives the page views dictates the real price of advertising. But without the right metrics, they are not able to package and price their advertising inventory to maximum revenue potential.

Most publishers sell advertising inventory based on aggregate measures of page views and unique visitors, assuming that views are distributed evenly among visitors. But here’s the reality. First, a small number of loyal visitors (“Fans”) consumes a disproportionately large number of page views (and ad impressions), while a large number of one-time visitors (“Fly-bys”) consumes disproportionately few and a small number of automated “Scrapers” consume a large number of page views. Second, the advertising value of Scrapers and out-of-market Fly-bys is zero – in effect raising the real price of advertising to loyal visitors and in-market Fly-bys.

This infographic illustrates how the distribution of page views across the audience affects the real price. Suppose a publisher prices a thousand page views for $50 (a.k.a, $50 CPM), the expectation of the advertiser is that these page views are delivered to the target prospects at the top of the advertiser funnel. What actually occurs is that seventy percent of the page views come from the loyal audience (i.e., target prospects), and thirty percent of the page views are generated from Fly-bys and Scrapers. Suppose half of the Fly-bys are in-market (i.e., target prospects), the advertiser purchased seven hundred and seventy five actionable page views consisting of seven hundred loyal audience page views and seventy five in-market Fly-by page views.

In this example, $50 is the cost of seven hundred and seventy five actionable page views which makes the real price of advertising $64.60 for one thousand actionable page views or $64.60 CPM. The reality is that a publisher inventory consists of a relatively small number of high-value loyal audience members diluted by lower-value Fly-bys and Scrapers. So if the publisher is selling all the impressions at the same price, they are underpricing their premium inventory and overlooking ways to make more money from the lower-quality inventory. Audience metrics allow a publisher to sell the right impression to the right advertiser at the right price improving both quality and revenue of advertising.