Why newspaper banner ads took the first hit from recession

Here’s some math behind failing newspapers. Bloomberg reports online ad sales at newspaper web sites fell 3 percent in the third quarter. This is significant because overall online ad growth is supposed to slow but not reverse in the current recession. Why are newspapers now sucking wind online in what should remain a growth medium?

The problem is how newspapers price online banners. Would you rather pay $1.40 or $14 to get a consumer to visit your web site? Newspaper sites are often the most costly.

Newspapers (as well as other “marque” or highly ranked web sites) often fail to deliver results online because they charge on a CPM (cost per thousand impression) basis vs. CPC (cost per click). This is critically important for media planners to understand because a $20 CPM at an average 0.14% click-through rate works out to a $14.29 cost per click. Which, as we noted above, is 10 times higher than the CPCs at ad networks.

Ad networks, or groups of hundreds of sites, can provide the same or better consumer targeting and often charge an extremely low cost per click of $1.40 or less. The irony is that many ad networks can place your ads on the remnant inventory of main marque sites for one-tenth the cost.

Sure, marque sites have value for branding or reaching specific audience targets. But ad nets and retargeting now offer the same at a fraction of the cost. In general, costly CPM buys, no matter how “strong” the main web site brand, are no way to blow your budget in a down economy.

Photo: Network Osaka.

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