Rob Norman has a take on where advertisers should be reinvesting their recession dividend.

In the delivery business brand owners have received a recession dividend in reduced costs per thousand. The smartest ones will re-invest the delivery dividend in the assets and processes required to win in discovery.

For many companies, what seems like a cost savings in CPMs, it often chewed up in lower margins and reduced sales.  At the same time, ad rates have adjusted to performance levels that have a greater ROI in categories where supply continues to grow or where there has been attrition in advertisers.  This opportunity may be small on a market by market basis, but is significant as long as more inventory can be identified.

Developing a discovery strategy is the real heart of the emerging marketing practices of search and social media.  It involves asset creation, optimization and distribution and is, in a general sense, a far more atomized approach than advertising with a far higher failure rate.

I think the assertion of search and social media as the foundation to discovery is key and true, but the issues of scale and efficiency remains.  Identifying fragments of well performing inventory can certainly be largely automated and will deliver a disproportionate amount of value impression by impression, but at what cost.  From what we have seen, the efficiency play of  buying lots of impressions at a lower cost and running them like a shotgun blast picks off the valuable segment at a lower total cost of reach.

For advertisers to invest in more efficient buys through better identification of inventory and creative the results of the optimization function must change.  The cost of the mass buy must be less efficient than the targeted buy.  If advertisers see this coming.  Now is a good time to invest in the processes and technology, but if supply continues to outstip demand, I suspect we will continue to see depressed CPMs.  Until then, we hope the recession dividend will be reinvested in larger buys than removed from the market in its entirety.

This entry was posted on Monday, August 17th, 2009 at 12:08 pm and is filed under Online Advertising. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.