Should Branded Content = Premium CPMs?

Mice in the front door and elephants out the back.  This is the picture painted by media executives when discussing the advertising revenue problems they face. An ever increasing inventory of display advertising has driven down CPMs making the possibility that online ad revenue could ever come close to matching offline revenue seem remote. While content companies earn pennies from online ads, they lose dollars as offline advertising shrinks.

While this growing online ad inventory reflects the endless supply of new online content sites, it also results from improved advertising tools and processes that now allow any site to easily sell targeted display advertising.  Ad networks aggregate sites, large and small, and sell demographically and behaviorally targeted audiences, making the quality of content found on those sites, they argue, irrelevant except for how well it attracts the target audience.  An advertiser that wants to reach a specific demographic no longer feels the need to pay a premium on a branded content site when it can buy an ad network and reach the same demographic on hundreds of small sites of sometimes uneven quality that happen to reach that demographic. (A recent Business Week article noted the trend.) We’ve gone from a world in which content is king to one in which content is irrelevant.

Or have we? If we look at extremes, it’s obvious that we’re not there. The Wall Street Journal still commands premium CPMs and mainstream advertisers still don’t advertise on pornography sites, despite the fact that porn consumers buy goods and services just like everyone else. So we’re talking about degrees here, but that still isn’t particularly comforting for branded content producers.  There must be more, and there is. The January Online Publishers Association study, Improving Ad Performance Online, showed that ad effectiveness is consistently higher on branded content sites than on other sites, including portals and ad networks. (Ad networks fared especially poorly in the study.) An April 2009 BrightRoll Video Advertising Report surveyed advertising executives and found that the most important factor in online video CPM pricing is “quality surrounding content,” suggesting that these executives also believe that video ads fair better on branded content sites.

Of course, when we talk about the performance of online display advertising, the bar has been set far too low.  The audience has trained itself (or publishers have trained them) to largely ignore banner ads which are often positioned in “ad ghettos.” Another way branded content sites need to distinguish themselves is by offering advertisers new ways to get their message across. A recent article in AdWeek discusses the efforts of sites such as The Daily Beast, Digg, and Meebo to move beyond the banner.

Ultimately, as Josh Chasin says in Metrics Insider, the question comes down to, “If I reach the same person with the same ad in two different vehicles, does the ad perform differently depending on the vehicle?” We have evidence to suggest it does, but with the popularity of ad networks in the current recession, it would appear that advertisers aren’t interested in that message. If branded content sites want to maintain and regain their premium pricing, they must do a better job of explaining why an advertiser should pay a premium above ad networks.

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