Real estate giant has decided to drop television advertising, and move its spend online. Why?

• TV’s ability to drive up brand recognition is no longer needed; the firm already enjoys 97-99% name recognition
• In 2008, lead generation via online increased 237%
• Cost per lead fell 62%

The fact that the real estate market has tanked has probably made the decision a bit easier. Performance-based marketing can leverage the brand equity it built during the boom years and let it ride out the downturn.

Interestingly, Century 21 was the first real estate franchise to advertise on television back in the 1970s.

As any publisher knows, CPMs can move up and down.  While they are increasing, publishers are content, but when they go down, it can be very unsettling for publishers.  Today, there are few deals available for publishers at guaranteed rates while the overall online ad market is seeing some strong headwinds that are severely impacting CPMs.  In this post, we are going to provide some insight to why publishers may be seeing giant swings in CPMs and what they can do about it.

It’s hard to listen to the financial news without hearing the term liquidity.  There are two definitions of liquidity.  The first one refers to the ability of turning an asset into cash.  The other type of liquidity is defined by how much an asset can be bought or sold in a market without moving the price.  The more active buyers and sellers are in the market, the more liquidity, which helps keep prices stable.  If anyone buyer or seller leaves or enters the market, the price should remain stable in a liquid market.  Right now, I think the overall ad market is experiencing a liquidity crisis.  Advertisers are leaving the market in droves, destabilizing prices.  Once a decent campaign ends, there aren’t enough buyers ready to fill the inventory as it opens up.  The growing gap between active campaigns is causing the fluctuations in price.  In the current advertising market, larger ad networks with better liquidity will offer publishers more consistent payouts, while small ad networks are more likely to have large fluctuations in pricing with spotty buys.

What can publishers do?

First, publishers should consider establishing relationships with large horizontal ad networks like Google AdSense and Advertising.com.

Second, publishers should look at the fill rates of their smaller or specialty ad networks and consider decreasing the amount of inventory they are allocating to them while at the same time tightening up the frequency caps to one to two impressions per 24 hours.

Third, publishers should examine their international traffic and make sure that they have ad networks capable of filling the inventory.

We also recommend using prudent judgment when it comes to adding ad networks to your overall mix.  It’s unlikely that adding many additional ad networks will help stabilize earnings if publishers are already filling their inventory with reasonably frequency-capped runs.  Instead, it can add to the complexity of managing inventory and have an overall negative impact on earnings.

Behavioral targeting has taken a lot of heat from consumers, privacy advocates, and even the government, for an industry-wide lack of transparency about how data is stored and shared. NebuAd and Phorm have been the most high-profile targets, but there’s been a growing sense that legislation might rein in the industry unless it demonstrates that it knows how to behave.

Four industry associations that have an interest in seeing online behavioral targeting stay clean, the American Association of Advertising Agencies (AAAA), the Association of National Advertisers (ANA), the Direct Marketing Association (DMA), and the Interactive Advertising Bureau (IAB) have banded together to preemptively head off accusations of laxity and negligence with new standards for privacy that behavioral targeting firms must abide by.

The timing is probably wise, given that the incoming Democratic President Obama and strong Democratic majorities in both houses of Congress are shaping up to be relatively regulation-friendly. The industry got a warning from the FTC a little over a year ago.

Gloom and doom tends to dominate online ad market projections these days. JP Morgan and Barclays Capital analysts posted dismal growth prospects at the beginning of the year. eMarketer, the industry cheerleader, continued to downgrade its projections for 2009 through the latter part of last year. Chatter in the blogosphere would only seem to delight if you were given to schadenfreude.

With such a grim outlook, it’s nice to hear optimistic projections contrary to ever-plunging growth figures. Here are two I saw the past couple of days:

Small business owners plan to maintain (60%) or increase (26%) ad spend in 2009; most optimistic about online

Though 97% of U.S. small-business owners have some degree of concern about today’s dismal economy, 26% plan to spend more on advertising – especially online and direct – and another 60% plan to spend about the same as in 2008, according to a report from Ad-ology Research.

The “Ad-ology Small Business Marketing Outlook” survey found that though 25% of owners of small businesses with less than 100 employees are fearful about the current economic situation and 58% are concerned, they are also cautiously optimistic, writes Marketing Charts. Some 83% expect 2009 sales to be up or about the same as 2008.

In terms of 2009 spending on various media types, more than half of small business advertisers plan to spend the same or more on the following: Online advertising (69%), Yellow Pages (54%), newspapers (51%), and direct mail (51%).

At the other end of the size spectrum, Mike Peralta of AOL’s Platform-A was optimistic about the spending prospects among CPG clients, even though some verticals, like auto & retail, are most certainly down.

E-Commerce Times: Do you think the online advertising industry can survive this recession? It’s getting ugly out there.

Mike Peralta: Yes it is. Online advertising, though, is performing relatively well, although not all of the categories are up. Retail, for instance, is down; so are autos. But what is happening, and why I am bullish as we go into 2009, is that there are a number of categories and clients out there that have been underrepresented online.

For instance, consumer packaged goods companies have spent between 3 percent and 4 percent of their overall ad budgets online. That trails by a third general ad spending online. As the economy gets tougher, a lot of folks will look online as a way to run a more effective campaign.

ECT: So you see a boost in CPGs’ online spending in 2009?

Peralta: Absolutely.

The Online Publishers Association (OPA) released the results of a study today as a followup to another study (full PDF) published six months ago that found ads performed better (higher impact on brand favorability and purchase intent) on branded content sites than on portals (content aggregators) and other types of Websites. The study used data from Dynamic Logic’s MarketNorms database.

The recent study took a look at 47 different performance metrics  on original-content sites vs portals, social networks and other types of sites, and found that despite the recent economic downturn, advertising on the former continues to outperform the rest. Original content sites generally have a strong advantage at attracting traffic because of their unique product offerings, but, it seems, advertisers benefit from the association.

Here are a few data points, comparing original-content sites with other site types:

• aided brand awareness: original-content +38%, ad networks -19%, over the past six months
• brand favorability: original-content +27%, ad networks and portals showed double-digit percentage declines over the same time period. This was particularly the case for younger (18-34) and more affluent ($75k+) Web audiences.

Why? We can speculate that higher-quality sites demand more respect, however subconscious, among Web viewers, and brands associated with them are more likely to enjoy a halo effect, enjoying an implicit endorsement from the sites. This might provide some comfort to original-content publishers smarting from seeing value bleed to portals and aggregators through behavioral targeting.

Silicon Valley Insider’s Michael Learmonth, writing for Advertising Age, contends that top online content producers, destination sites that identify Web users with a vertical buying intent in particular, are losing advertising value to parasitic behavioral advertising networks. The content producers, such as Edmunds.com or NYTimes.com, do the heavy lifting of providing value that brings users to their sites. Behavioral advertising networks on these sites, usually running on remnant inventory, capture user data and seek to monetize them based on their established profiles on lower-quality sites that the same user might visit later.

For example, a visitor to WebMD.com might read an article about mesothelioma, establishing that visitor as a possible asbestos-victim litigant, the clicks on advertisements for which pay top-dollar among lawyers trawling the Intertubes for potential clients. However, instead of clicking on an ad on WebMD, the visitor might end up clicking on a mesothelioma ad on a low-CPM social network a few days later. The social network enjoys a great RPC (revenue per click) without having done any of the valuable content building that profiled the visitor in the first place.

The heart of this issue is the value of user data that high-quality content networks are effectively giving away for free to the behavioral advertising networks that they work with to monetize their remnant inventory.

Increasingly, large publishers are choosing to stop contracting with third-party ad networks because they find visitor data more valuable when it is exchanged directly with their advertisers (and because they have greater control over ad creatives and scheduling). But smaller publishers without the scale to build their own advertiser relationships or even demand premium pricing might have gotten the short end of the stick, despite delivering a unique value proposition in carving out a niche to advertisers.

What’s next? As publishers using behavioral ad networks begin to understand that the value of their content is often recouped beyond their sites, they might begin to demand some of that dispersed value back. Privacy issues abound with user data ownership and transferability, and tracing an advertising click to its “true source” is a sticky proposition. But difficulties like these will have to be surmounted in order for behavioral targeting ad networks to continue to get buy-in from valuable publishers. The alternative might be worse: much like larger publishers like ESPN have done, smaller but targeted publishers might drop behavioral targeting networks altogether.