How free video uploads will drive down CPMs

2009 will be remembered as the year online video arrived, and it will force media moguls to drastically reduce the prices for ad inventory. You see, Apple unveiled its latest iPhone Monday with video-recording capability, making it easier than ever for consumers to upload movies. On the receiving end, Cisco expects online video streaming to quintuple internet traffic over the next few years. Put it together and consumers will capture content, share content, and then watch it, making all the ad space that used to fund professional media production worth less.

So far marketers, still shocked by recession, aren’t flocking to media buying opportunities. Nielsen just reported that U.S. ad spending fell by $3.8 billion, or 12%, to $27.9 billion in Q1. Marketers are retrenching in part because consumers are not buying as much stuff in this down economy; but marketers are also getting smarter with their investments, and they are not putting ad dollars in media vehicles where they cannot measure ROI.

Total ad spending doesn’t tell the whole story. Fewer ad dollars don’t necessarily mean fewer ads — just less bloated spending for Super Bowl broadcasts. The real tale is one of commoditization — advertising is becoming another product that is valued less by society. For instance, Adweek editor Brian Morrissey points out standardized web banner ads are ignored by consumers, forcing online marketers to either use ever-more intrusive formats or to fall back to performance-based, cost-per-click type buys.

So the price of advertising will begin to fall

What happens when your product becomes less wanted and your shelves are filled with it? Why, you have to lower prices. The supply of ad inventory is increasing, as slots become available on millions of blogs, within social media, even tied to Tweets. At the same time, consumers demand less advertising as it is deemed irrelevant to the content they wish to share. The trend is visible already both in traditional media (radio networks seeing falling ratings are being forced to reduce rates) and online (as ad networks offer CPMs in the $2 range).

More ad space. Less demand. Lower prices. There’s an opportunity coming to advertising as new bargains emerge; the question is, as advertising becomes more challenging, do you have the right systems in place to measure what really works?

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