Wessel,

Great catch and very relevant especially the bit at the end.

“The problem with online is that many of the [media] costs are so much lower that it’s dragging everything down,” he says. “But for agencies, the irony is that their costs are so much higher online than they were on television,” he adds. That eats into their profit margins.Because the internet audience is more fragmented, every pound spent on advertising space online costs almost three times more, in terms of time and labour, than it would if you spent it on traditional media."

This has always been a problem for agencies and Networks offer an attractive solution. Only its not really a solution at all as it doesn't work for the publishers - and is therefore unsustainable.

My experience is that everybody online is always looking for the "tech" solution to the systems problem.

In reality the solution is probably in people. Web publishers (like me)  love an opportunity to work for our clients. Invariably we know the parameters of our audience better than the agencies and are better able to optimise for their clients than they are. Publishers - especially the minnows - will work very hard for regular income if given the opportunity. Unfortunately they seldom are.

Instead of a cooperative dynamic being set up - agencies and networks both seek keep publishers as far away from clients as possible - largely for fear of losing their extortionate margins. Often clients have little idea where they are advertising at all - except for the headline names at the top of the schedules.

The other aspect of what is being talked about in the article referenced is that agencies for economic and management reasons feel harassed by the internet.

When you also make it cheap as chips the margins for agencies are squeezed as well as for the publishers making the situation even worse.

Looking in the discussion above I cannot help but get the impression that there are several people in the advertising/marketing industry who are fed up with the internet and who on a bunch of levels would really rather it just went away.

There is a lot of work to do.

Interesting piece in the FT…

"Long-established agencies are floundering in a sea of social media, viral marketing, behavioural targeting and three-dimensional “augmented reality” (see left and below). They are reacting to these buzzwords, not coining them. And their businesses, little changed since Draper’s day, are ill-equipped to cope. “In the old world, agencies were way out in front of clients,” Mary Beth West, chief marketing officer at Kraft Foods, said in a panel debate in Cannes. “Now ... clients are ahead of the agencies – and the consumer is ahead of all of us.”

Economic pressures are making change in the marketing business more urgent, according to Jim Stengel, who as chief marketing officer of Procter & Gamble until last year was the industry’s biggest single client, before leaving to establish his own consultancy. As marketing budgets are increasingly spent on “service and utility and help for customers”, a smaller slice of the pie may be left for what agencies have traditionally done. “What was already a volatile and changing situation is just accelerating,” says Mr Stengel. However, he adds: “In the long term, it’s positive because I think it has opened people’s minds up to different ideas and models, and to taking more risks.”

Some agency chiefs admit that their model is ill-suited to the internet age. Fernando Rodés Vilà, chief executive of Havas, the French agency group, says the old wartime metaphors of “campaign, target and launch” no longer apply. “The model that started with world war two was based on control in a few hands: very few media, two or three relevant brands in each sector and a few agencies,” he says. “We are [now] facing a very different panorama, which is much more democratic, much more social, much more interesting but much more difficult for marketers.”

This change has been under way since well before the recession started to bite last year. Global advertising expenditure as a percentage of gross domestic product has been falling since 2002. Up until then, it had risen and fallen in line with the broader economy since the 1970s, according to Robert Shaw, a professor at London’s Cass Business School. He blames the divergence on the shift of budgets to the internet. “The problem with online is that many of the [media] costs are so much lower that it’s dragging everything down,” he says. “But for agencies, the irony is that their costs are so much higher online than they were on television,” he adds. That eats into their profit margins.

Because the internet audience is more fragmented, every pound spent on advertising space online costs almost three times more, in terms of time and labour, than it would if you spent it on traditional media, says Quentin George, chief digital officer at Interpublic’s Mediabrands.

The traditional time-based billing model is tough to uphold when developing online campaigns, says Rich Silverstein, co-founder of Goodby, Silverstein & Partners, an agency owned by Omnicom, the global marketing giant. “The internet is so deep it’s like drilling for oil,” he says. “So far, I don’t think we’ve really charged for all the time we’ve put into it.” "

http://www.ft.com/cms/s/0/92d4daf4-933c-11de-b146-00144feabdc0.html?nclick_check=1

I totally agree with Alastair when he says ad networks are a dumb idea for all the same reasons.

In fact, outsourcing your advertising to a third party is a bad idea too. You hand over the customer relationship to someone else.

Plus, the revenue split that ad networks take is completely out of proportion to the value they provide, imho.

I am very much enjoying the dabate here.  Lot's of interesting takes on this issue to be sure. 

That said, what is not debatable is the efficacy of either advertising in general or advertising online.  They both work.  There is literally rooms full of research to prove it.  What's more, the most sophisticated marketers in the world have conducted much of this research.  So while some folks will decry advertising and say they never look at it and it doesn't work, the truth is simply that it does.

I would argue that online advertising (yes those banner ads…but also video ads and expanding ads and so on) actually works better then offline advertising.  There is even research to prove this by the way although admittedly we are still in the early innings of this discussion.

This is not to say that search text links don't have value.  Clearly they do, but it is a differant sort of value.  But more on that in my next column.

Gordon Steen explained the fundemental core problem people want to ignore, especially in this thread.

The Web was designed for hyperlinking and good hyperlinking is contextual in nature. There must be a "contextual workflow" in place from the original hyperlink to the destination to be successful.

For example, let's say someone operated a surfing e-zine and wrote an article on beginner surfboard. In that article, if they hyperlink to a e-commerce site that sells surfboards, this is the most effective manner to generate qualified leads and eventually a good sale.

Graphical IAB 480x64 ad banners popping up in the same section as some "advertiser" does not have contextual background to it and the core reason why it performs so poorly. This is why I understand Gordon Steen point about clicking on these ad banners only to see some brochure or fill-out form instead of direct action related to the original clickthrough source.

Google, Inc. already demonstrated with success contextual marketing science works. Those that want to cling to "advertising" are those who are living in cognitive dissonance, holding on to old science..

Who cares about online ads.  Not me.  I am looking for something useful and they don't give it to me.  But its not the ads, sometimes they are good.  But when you click, they don't do the job.  They give you a lot of brochures and tables or if there is a contest, it doesn't work.  Offline ads don't have these operational problems because they are just there.  On the Internet, if big money fails once, smart people don't give it a second chance.  They'll give Facebook a second chance because they are on it.

It seems that big business just wants to spend money or be cheap, do the easy thing and like health care and the auto industry, hope no one will notice until it all collapses.  Making things work properly seems to be a lost art.  The Romans probably had the same problem.

Alpha G77:

"the cost of publishing content is virtually free"

Sorry you have lost me and every news publisher on the planet at that point. The cost to view content is free but it costs lots to create it - especially good content. And even if you have user generated content (= free) then it still needs moderation/management/hosting etc. You are correct that it is cheaper than air travel - granted - but I think the misconception that online publishing is both easy and cheap is part of the problem that we have with advertisers. Online publishing and audience creation and retention is not that different from any other medium - it requires talent, tenacity, professionalism and money.

"Trying to optimize your remenant inventory through ad networks is a smart idea, it doesn’t destroy pricing power for publisher because there is no pricing power to begin with for this long-tail of inventory"

Wrong. It is not a smart idea - its a dumb idea. We have tried it and it destroys value in numerous ways. It is disrespectful of the audience, reduces the effectiveness of remaining inventory (and therefore valye) and directly if advertisers can purchase space on your website on a CPC or CPA basis they will not even consider CPM purchasing.

Network advertising is destructive in the specific instance as well as in the aggregate.

alastair

Jim - I don't know what online travel service you've been using to book, but I mostly see fares go up when I wait till the last minute these days - that's because the airlines took capacity out their networks over the past few years and are able to price-discriminate between those who are price-sensitive and those who are time-sensitive by raising fares at the last minute on what are generally overbooked flights.

Revenue optimization or Yield Management works in the Airline industry when either demand is high (as it was during this last boom cycle) or when capacity is limited, which generally happens during bust cycles when the airline CEOs get smart and agree not to compete with each other for routes or market share.  Yield management is critical to the airlines achieving the razor thin margins that they do - it has nothing to do with whether this is an effective method and everything to do with the industry cost structure which historically is labor first and jet fuel second.

So here is where I believe you are mistaken Jim.  In the online world, there is no way to limit overall capacity - new websites, blogs, and applications pop up everyday and any one of them has the potential to amass either a lot of traffic or a very niche and vaunted set of eyeballs.  However, unlike the high cost structure of the airline industry, the cost of publishing content is virtually free.  Trying to optimize your remenant inventory through ad networks is a smart idea, it doesn't destroy pricing power for publisher because there is no pricing power to begin with for this long-tail of inventory.  Online IS different than offline because marginal costs of ad-space creation tend toward zero.  The only way for publishers to optimize their revenue in this world is to either drive as much traffic to your content as possible and therefore collect what you can from as many impressions as possible or to have narrow casted content that engages its target audience and for which you can sell premium ad space.  Depending on the value of the content to audiences will determine which strategy is best and in fact, for most publishers the optimal strategy is to price what you can and collect what you can on the rest.

Wessel,

We have been turning a profit for around five years and are in the politics, business and localised news niches.  We earn revenue from other sources as well as advertising.

I would add that while we are getting by - even in the recession 0 its getting harder to earn a profit from advertising for precisely the reasons that Jim explains.

Rick says:

"The real judgement on profitability will always be size and objective.  A small site highly targeted niche site that generates 1,000,000 uniques a month and at least 10,000,000 pageviews can be profitable if sales is managed well."

We are profitable on a smaller scale than that and do not have 10 staff but are not far from it.

As for Google… Google adsesnse for text has a place - Google adsense banners are just as destructive as all other networked performance media.

Our experience with Google Adsense for text vs networked banners was that the former delivered around five times as much revenue.  Meanwhile their is a factor of ten between what Adsense for text delivers vs premium display.

Basic problem with networks - they are lazy. They do not understand or address audiences. They are the equivalent of carpet bombing and equally unsustainable.

Alastair

Having used ad networks and Google, I'll admit Google is "better".  But it's no different, either.  They may pay slightly better (assuming better contextual ads are displayed), with slightly better click rates.  But still not at national ad levels.

.4% CTR is the average, now, for the web as far as I know.  My site averages about 1%, including several high % click ad placements (without giving away what they are, as I prefer to remain anonymous).

I don't view the click as a good basis of payment.  It is as much a variable based on the kind of ad and its creative as it is a judgement on my users interest.

However, I recognize the value and uses of ad networks.  They have "a place".  You just have to figure out how to use them effectively, as Alastair has done with Google.

It isn't rocket science at all.  It's common sense.  Any average person with a decent knowledge of statistics can be an effective inventory manager if they have common sense regarding business.

The real judgement on profitability will always be size and objective.  A small site highly targeted niche site that generates 1,000,000 uniques a month and at least 10,000,000 pageviews can be profitable if sales is managed well.

But if that site has a staff of 10 or more, it's going to be hard to be profitable.

Alastair Thompson, thanks for the post. Are you turning a profit? Care to share what niches you are in?

Dear   Jim Spanfeller,

I am a publisher - small premium niche high value demographics - and I dumped adnetwork banners more than a year ago after I realised that they were.

1/ earning me considerably less than Google text ads
2/ undermining my ability to sell real display ads

Since dumping them we have had to look closely at how we do use our ad inventory. We use a mixture of house ads, pro-bono ads, ad swaps for merchandise/tickets etc. and unless we are fully booked tend to give our paying advertisers considerable extra exposure.

All of the above strategies have enabled us to get back into selling ads for real $$$ and in the process help us to be taken seriously. Notably we have also seen our average click rates rise back from around 0.18% to around 0.4%. Looking after your ad inventory makes it more effective.  Its not rocket science.

Ad networks are in my view parasitic and suicidal for online publishing. I only hope many more people read your wise words.

As for those above who have remarked that online advertising doesn't work - I will not waste my breath. Clearly it does work.  One of the real problems in this industry is the hostility of many marketers towards a medium that they do not yet understand.

Regards
Alastair Thompson
Scoop.co.nz

Finally, results are results. There is no difference in a click, and definitely the most important issue for all the search engines and adnetwors is the content, that the thing and the pricing depends on its importance and appeal, so anyone who wants to use it for theis benefits should paid the price settled.

Lets think in long terms.

Twitter is the ultimate self-indulgent garbage.  140 characters to say - what, exactly?

It's like reading the headlines of the paper and telling me you know what's going on - no depth means you don't really know what's going on, but you've indulged yourself enough to claim you do.

Twitter cannot pass along enough value to be of use to anyone.

"Hey, I'm sitting on my deck having a margarita", or something to that effect is 95% of what I got out of Twitter.  Thanks, I'll pass.

Of the "good stuff", there wasn't enough room to elaborate.

Facebook, on the other hand, combines the "best" of Twitter - a commentary portion - with the ability to post articles that have actual depth.

I have used Twitter.  It's the 2009 version of disco and cocaine.  Everyone thinks it's great, but in the end we all will realize it's garbage.

"hate twitter - it’s crap" - care to tell why?

In my experience people who dismiss Twitter with one liners have not really tried it. They have looked at it, perhaps signed up to it, perhaps even posted something about their breakfast, but they have not really given it a go. I only got it after the third attempt myself.

Like with a bicycle, you cant say the experience is crap if you have'nt actually cycled.

If you have used it - fair enough.

Your right, many good bloggers supplement their income through advertising, very few can afford to give up their day job. This makes them amateurs in my book.

Sigh.
Wessel, I didn't discount "amateur" stuff.  I said professional stuff is better.  It is.  Huffington is professional.  Encumbered or not by print, it is professional.

I actually visit a number of blogs (hate twitter - it's crap), but all are of a highly polished, professional, quality.  There is a difference between a high school kid who throws up a video or blog to accomodate their interests and a committed professional.  Many professionals, today, began as "amateurs" who used the internet to break into media via a means that was not available in traditional media.
In almost (I said almost) all cases, advertising is what allowed them to move to upper levels of the blogosphere by providing them at least a subsistence level until they became more widely recognized (or in Huffington's case, they were already millionaires).
At any rate - the description you provide doesn't alter the case FOR advertising.  In some ways, it makes the case.

Jeff,
  I agree - the audiences are different, and the media are different.  And while each media has certain idiosyncracies that open opportunities for a variety of different revenue generating opportunities (who could've foreseen XM Radio in 1955?), the fact remains there isn't much difference when it comes to the math and management of advertising.

The internet, the mobile internet, and even email are completely different media than TV and print (and radio and other "older" media).  Demographics on newer media are not relevant.  1:1 marketing/advertising is.  How many advertisers and publishers reading this article are truly leveraging the cost effective technologies available for 1:1 communications?  Having worked with online advertisers and online publishers for more than 10 years, I suspect it is a very small number.

Jeff Sable
Chitika

"I’d have to say that the best stuff remains the professional stuff "

That is plainly not the case. Sometimes it is, and these professional outfits do make money of advertising.

See Techcrunch and Huffington post. (Note both highly specialised and not cumbered by having to print).

But certainly not always. In almost every field or niche you find amateur bloggers and their community of commentators better or at least up to the task.

Fashion? See Fashiontoast or even better StyleBubble.

South African politics? See Constitutionally speaking.

And even when blogs are too niche and don't give you the whole picture, following the right people on Twitter will get you to the best content that interests you m- an aggregated picture if you will - and you'll get it first. Much more than following any magazine could. (I got to this article through Twitter).

Read this, its interesting in this regard.

http://scobleizer.com/2009/08/26/rss-interesting-or-boring-hint-marshallk-and-louisgray-were-not-normal/

Having been in this for 10 years, I'd have to say that the best stuff remains the professional stuff - that which is worth advertising on.

I don't see the future as amateur at all.  If anything, it needs more pros - the amateurs are what have killed it so far.  Most of online's ad buying and selling, up until now, has been done by people with limited experience in ANY media.

I will point out that, when I first arrived at AOL in its heyday, after spending 15 years in TV, I had a neophyte 27 year old tell me, when I shared some wisdom on pricing and inventory management:
"you come from an industry that's a dinosaur.  We're building something new, so what you contribute is not worthwhile".  This person is still in the business and has failed several times at what they do…..but keeps getting hired! 

It's the ignorance of what works that hurts the most.  When a 26 year old buyer or planner tells me they need "reach" in an online buy, I always shake my head. 

Reach doesn't work online.  And I'm the dinosaur?

Rick, that is the scary thing - perhaps (unless your highly specialised like the FT) there isn't an alternative.

Perhaps the future is amateur.

Perhaps many publishers should get out of the publishing business.

Wessel,
  I've read this over and over again.  It's long winded and obtuse.

What is the solution, if this is the problem?

I agree - advertising is a tax on consumers to get them to relate to the brand.  They pay more for a "name".  But this is standard behavior, and has been through the years.  Nothing new there.

They haven't developed a "blind spot" at all.  Online advertising simply isn't being valued in the same manner as traditional media (to be fair, cable was treated this way for the first 15 years of its existence - now it is considered as good as, or better in some circumstances, network TV). 

Advertising still works.  The question is how to make it more effective and more valuable online.

I have yet to read anything - aside from the non-applicable Google comparison - which shows that there are other solutions on how publishers can make money WITHOUT advertising.

"It’s the quality of the products, services, interactions with an organization that builds an authentic brand character. If this sounds radical, or if you’re still using marketing to try and manipulate perception, you are walking on thin ice. For your consumers and observers, there is no such thing as a “brand experience,” only a human experience which may be associated with a brand. The meaning of the interactions themselves must be addressed…

Curated perception has long been a free-for-all land grab aimed squarely at focusing the attention of a market. Because information is now instantly and freely shared, those brands with the largest gaps between fabricated perception (traditional marketing) and the authentic character of their actions (products, services, human interactions) will be the quickest to sputter and implode. This is true no matter what new platforms are employed to manipulate awareness, or what tools we use to examine them. Brand experience is an illusion, human experience is real. The problem is not perception, but rather the consequences of human behavior. The solution is found through trying to change perception, but through creating more constructive human interactions and positive, authentic experiences."

http://www.zeusjones.com/blog/2009/the-fleeting-illusion-of-brand-experience/

This is of course just a long winded way of saying advertising is a tax on an unremarkable product.

Does it have bearing on this debate? I think it does. Online - where information can easily be shared - "the former audience" are narrow and broadcasters themselves and seem to have developed a substantial blind spot for traditional advertising?

Online/Video Gaming has "users", and they have advertising.  The issue isn't how you define the eyeballs, it's how you reach an audience.  Billboards are read by "users" of the highway system, not audiences.

As for the "fact" (which I would dispute as a fact) that 80% of the clicks are driven by 16% of the user base and that they are lower income and education - where does that leave TV or radio?

Most TV viewing is by lower income and education levels, and that's well documented.  So should they just stop advertising to these people?
Furthermore, why is the click the final determinant - where do radio and TV get their value judgement?  They have NO means of providing immediate value feedback, like the web.

I agree that the internet has far more excess inventory, however.  But as I stated earlier, this is a result of how the impressions are served - individually as opposed to bulk.  This singular difference is one reason some people from TV or Radio have a hard time "understanding" how the web works.

It's a simple thing to overcome - impressions are impressions if you're just talking about the math.  But some people have a hard time getting past the fact that TV and Radio have "units" which are comprised of impressions.  This is why they are terrific reach vehicles, and the web is not.

Ed Dunn has it bang on with his comment above. This statement:

"For example, we now know that 16% of web users generate 80% of clicks and that this 16% represents the lower income and education segments of the total user base. Do we really want to be held accountable as an industry by metrics generated by the lowest common denominator and a minority of users to boot? I can’t think of too many successful models using these types of metrics."

...just speaks of the failure of advertising in convincing most people, especially in the interactive online environment.

On the web, where we have users not an "audience", does advertising make sense?

Also, radio and magazines might have had excess inventory unlike TV, but they certainly don't compare to the abundance of media we have online.

If TV adopted web practices, Billy Mays and others like him would be selling Ford or Chevy automobiles, not lint brushes.

Folks, intelligent people research before they buy, and this does not show up in a direct response campaign for $200 headphones from Bose or a $1,500 laptop from Dell; marketers have become unrealistic when it comes to online metrics.

Jim Spanfeller completely makes sense. Publishers need to stick to their guns.

I believe the online display advertising area of online marketing will mature when it is viewed not only as a different online product then other online marketing products, but also when radio, billboards, TV and other offline marketing efforts are held to a similar offline reporting and comparable analytics or visa versa. My guess is there is going to be a need for more offline reporting and accountability.

Andy, I agree with point 2, but only half of point 1.

Ad networks are hurting pricing, because they are perpetuating the agency proclivity for purchase of "reach".  Reach is NOT a primary objective, nor should be one, in online.  It's a consideration, but not an objective.  Sadly, agencies continue to use reach as the judge and jury of buying decisions.

Someone earlier points out that agencies don't want the hassle of buying 80 websites which perform well, as opposed to 3 or 4 which provide great "reach" but don't perform as well.  I can understand this concept - but sadly feel it's antiquated.  Technology helps to reduce the effort involved in managing multiple campaigns.  The real reason 80 good websites are NOT purchased is ease of thought and effort.  It's easier to purchase Yahoo Finance because it's "big" than to buy a site like Minyanville which is "small" - but more heavily concentrated in the clientele one wishes to reach.

Fact is, ad networks (remnant) have a role, and it isn't a matter of "low" versus "high" quality.  It's a question of making sure sellout and revenue remain high enough to justify publishing.  That said, every media has a portion (most of its inventory) which is considered "of lower value" which they package in with portions that are "of higher value".  On the internet, due to the dissemination of impressions, the lower value portion dominates in a way that is not consistent with Radio, TV, or Print.

All three of these media purchase large numbers of impressions in bulk, making it easier to package the good with the bad.

Online is not as lucky.  Each impression is delivered individually, over a broad period of time.  As a result, budgets can be smaller, time frames can be contracted, and more targeted purchases are easier to make.

This makes the "remnant" portion of the business far more powerful in its pricing role than its counterparts in other media.

I think that one thing that goes unsaid in advertising is that not all forms of advertising achieve the same thing.

Take a big piece of technology (Database server)

1) Trade advertising/pr creates demand
2) Trade shows create brand awareness, sampling, interaction within a narrowed defined audience
3) Online ads help guide those showing intent to the customer.  You can't ask online ads to do steps 1 & 2.  So yes, its a promiscous sale, but its also the right vehicle at the right time.  Just as 1 and 2 were.

If you don't believe adnetworks are eroding pricing you must be from another planet, we just enabled a dozen or so large adnetworks a week ago into our inventory pool and the average cpm on that sold inventory is 15 cents.

Get real . . .

Jim,

Interesting article, as always.

I wholeheartedly agree your point about the online ad industry focusing too much on demand fulfillment and too little on demand creation.  That’s exactly why we built Brand.net from the ground up — to help advertisers with demand creation.  I also agree with your point about ad networks that offer some types of user-based targeting representing a potential “data drain” and a legitimate privacy concern for publishers.  This is an important issue and just coming to the fore for the publishing community overall.

That said, I disagree with two major points you make in this article.

First, you seems to be perpetuating industry confusion on the definition of “remnant”.  In the context of online ad inventory, “remnant” is commonly considered to be the opposite of “premium”, which is often used interchangeably with “high-quality”.  Thus if “premium” = “high-quality”, then “remnant” = “low-quality”.  Unfortunately this is often untrue.  When used correctly, “remnant” actually means “available to the spot market after forward commitments have been fulfilled”.  So the opposite of “remnant” is not “premium”.  The opposite of “remnant” is “reserved in advance”.  There are really two distinct axes at work here:  one describes quality of the inventory, while the other essentially describes the terms or process under which the inventory was purchased.  There is some correlation between the two axes, which I believe is at the heart of the persistent confusion; it’s a fact that remnant inventory is often of lower average quality than inventory that is reserved in advance.  However, due to traffic volatility, forecast errors, suboptimal pricing, supply/demand imbalances, etc., there is often significant volume of high-quality or “premium” inventory available in the “remnant” market. The airline standby example you cite is actually a good illustration of the correct definition of remnant, not (as I think you suggests) the incorrect one that has done so much mischief.  The standby seat has exactly the same physical characteristics (“quality”) as the seat sold in advance, but the difference in timing and deal structure results in a difference in value to both the airline and the passenger, which manifests in a difference in price.

This brings me to my second point: your position in this article on airline yield management practices shows some pretty fundamental misunderstandings.  Airlines’ lack of profitability has a lot more to do with unions, over-capacity and sub-optimal product offerings than it does customers risking their vacation plans or business objectives to save money on a last-minute ticket.  So I would echo Jason Kelly’s well-informed comments earlier on the thread and add that to suggest yield management practices are somehow to blame for the poor financial performance of airlines is like suggesting that ERP systems and supply chain optimization practices are responsible for the poor financial performance of the American auto industry.  It’s simply not true.

The bottom line is that ad networks and publishers can work together for mutual benefit over the long haul, but to do so requires careful management of channel conflict, an issue we take very seriously and which I have written on extensively.  This discussion is a valuable and important one, but I think we need to be more careful and rigorous in our thinking – the more so, the better off we’ll be as an industry.

Best,
Andy Atherton
COO, Brand.net

Jim, good details and a well-made case for "why". Now, the question is "how?".

Jim, thanks for your thoughtful piece, and for all your contributions to the online industry. While I genuinely respect and appreciate your accomplishments in this regard, I do want to offer some alternative viewpoints. (Full Disclosure: I work with ValueClick, who manages multiple networks.)

I don't agree that the situation is a simple as is outlined - that ad networks have had a major role in degrading the value of online ad inventory. Rather, I believe there several fundamental shifts in the advertising industry which are conspiring to create the situation you describe.

1. Measurability - There is no doubt that interactive marketing has accelerated the embrace of metrics in all marketing channels. However, it was merely an accelerant on a fire that was begun previously, by the direct marketing industry and sophisticated marketers with increasing demands on measuring brand impact. This increased focus on metrics and accountability inevitably led to marketers trying to place a monetary value on their spends - indeed, now looking at them as "investments" instead of "spends."

2. The Blur - With the increased focus on measurement, the blur between "branding" and "direct response" commenced in earnest. While there's a long way to go until the blurred mindset is fully embraced, I for one believe it is both inevitable and welcome. By beginning to view both immediate- and longer-term impacts of a program, marketers can better understand an entirely new dimension to the interactive channel. The more we can stop insisting on complete separation of brand initiatives and direct response initiatives, the more it will provide the marketers with greater insights, and service firms with some relief on the myopic focus on immediate payback.

3. Fickleness - With all of this, a mindset of "What gave you done for me lately?" has permeated the buying arena. It used to be that after a media property spent many years and dollars establishing themselves, the advertising premium they would insist upon would scarcely be questioned. With the democratic nature of the Internet, though, scores of other decent media properties have emerged, without the need for the investment of time and money it used to take. Frankly, my belief is that the biggest rub is the resentment that traditional media powerhouses have over being questioned. When the tipping point occurred between the establishment of the offline media brand as a trustworthy source of quality content and the premium prices it wanted to charge for advertising was achieved, the properties could - if they wanted - start selling as much advertising as they could, and then create content to go around the ads. This reversal of what got the properties there in the first place led to the perception that much of what is published is fluff, and the upstart "citizen-journalists" that have emerged online provided the bite-sized bits of meaty content for which consumers are now looking . This is a major disruption in the way things have operated for decades, and led to the buyers having the confidence to begin questioning the latent value of the media property brand.

So where do we go from here? As one might guess, I believe that networks, exchanges, etc. are here to stay. However, I also firmly believe in the protection of the media property's brand and rate card. Making sweeping statements that networks erode pricing without bothering to drill into the rumored 300+ networks that exist is like saying all magazines are a waste of money. Established, reputable network players learned a long time ago how to collaboratively work with their media partners to ensure that the best balance is struck between monetization for the media entity and appropriate value for the media buyer. Reputable networks do not promise inventory for a given media property without an explicit agreement from that property.

To keep in line with your travel industry example, a good network operates like Hotwire in the travel industry - a buyer can designate the caliber of property they're interested in, they can see a series of prices for properties in that caliber - they may even see a large pool of properties on which their ads MIGHT appear (again, with those properties' consent). But at no time until a firm contract is agreed upon is there any disclosure of the final properties that make up the buy. In addition, there is no subsequent promise that the same buyer can get the same property(ies) the next time out - if they like that property, they need to go directly to that property to negotiate the best rate they can. Otherwise, they have to assume some element of risk in return for the reduced rates.

This collaborative, partnering approach has been adopted by the top-tier networks in the industry and this, coupled with agreements about pricing floors, fill rates, etc. has led to many tenured, mutually-beneficial relationships.

Jim, thanks for bringing the industry’s attention to many of the issues publishers are facing today. While I don’t agree with everything you say within this article, I do agree that we need to buck up as an industry and regain control of the value of our medium.

Pricing is a serious problem for publishers. Much of this comes from a lack of technology to allow publishes to manage their inventory and business. Publishers have very little visibility in to their overall pricing, inventory value and cost of sales. Publishers have little to no control over 3rd parties selling their inventory and are generally lacking in terms of ad product segmentation. This mainly stems from the fact that publishers manage their business using “ad servers” built in 1996.

Well said, Jim

Tom,
  I thought that DART's Ad Exchange would provide that "arbitrage".  It seems to me having one (or several) central auction points for advertisers to seek out media and pay a reasonable price for it.

Rick makes some excellent points when he says the agencies need to do their part. The problem is that agencies don't want to deal with 80 invoices per month buying ads at small sites. They want to make one buy and have done with it so they can go do lunch. Which makes me think there's an excellent arbitrage opportunity.

Also, when it comes to the new business model for media, I like t call it a "Heinz 57" business model. You have to manage many revenues streams. Similarly with the agencies, publishers don't want to do that.

David O.
I agree - there is more value in other offline media.  But that is why the author (and I) are obssessed with price.  Where else can you purchase an ad for a $4 CPM?  At this price, a .5% click rate is reasonably priced…even if you consider brand value equals zero (which I do not).

Jim McCarthy - generally, I agree with you.  Advertising is really kind of a weird business and probably shouldn't exist.

When it first came into being, it actually WAS useful - providing information, letting people know of the existence of certain products, etc.

Over time, however, it has become a very different animal.  It's about entertainment many times, it's about ego other times, it's about who-knows-what most of the time.

But it should exist at some level, otherwise there is no way to have the breadth and depth of entertainment and information that we currently have.

Certainly, we can do with less of entertainment like the Kardashians and other ridiculous "reality"...that would probably HELP advertising.  But there aren't alot of options available, besides advertising, which allow for the levels of choice and quality (or what passes for it) that currently exist.

Banner advertising "doesn't work" is also saying Print Ads "don't work" and is also saying Radio Ads "don't work", etc.  If advertising doesn't work - then it should disappear. 
It doesn't, because at some level it does work.  The old saying half of my ad budget is wasted I just don't know which half has been assigned to several people.  Regardless of who said it - it remains true.

It's trying to figure out how to reduce this waste that keeps GOOD advertisers in business.  To that end, many have opted for solutions which they deem "valuable" - such as the click or the response (for DR).  Others have opted for "brand recognition". 

Regardless of the choice of measurement - it's clear advertising has a value and it's probably true that every method of measurement is useful to some degree.  That is why I eschew CPC advertising - it devalues the brand building portion and customer retention.  Why should I only get paid for one "sales lead" when each lead creates multiple purchase opportunities?

In the end, I think all publishers (including myself) would love to see a revenue stream that could keep us in business but also get us out of the ad business.  What is really strange is that it's almost impossible to get out of the ad business.  Even subscription based businesses get into it - because the subscription creates a "qualified audience" - someone who is desirable and willing to interact.

HBO may not serve ads in a fashion you and I recognize, but they certainly do have them.  So does PBS.  Fact is, a revenue stream is a revenue stream - and if you can have more than one, you will certainly try to get it.

I find it interesting that you admit that banners have ad/brand value but they don't work.  I'm not sure, aside from being facetious, what you're trying to say.  Certainly, it's funny that advertising is a weird and sometimes dysfunctional business.

But it is a business - and if it's run well (in some ways that the author of this article outlines), it can be very profitable for publishers and very useful for advertisers.

"banners, regardless of click rates, have value.  A message is still being sent and received… the direct model discounts the other more valuable aspects of advertising: return sales
brand awareness, information dissemination"

True, but how much value ? Offline offerings offer a much greater value in the areas of brand awareness and information dissemination.

With all due respect to Mr. Spanfeller, it appears he is making a valid argument for pricing integrity, but his foundation is misplaced.

Mr. Bcool was generous to synopsize "premium publishers should not offer remnant to networks and clicks are a poor measure of online ad effectiveness." This is crucial to understanding addressing the problem that Mr. Spanfeller is offering for discussion. Mr. Dietz (who I believe could partner successfully with Mr. Bcool) truly exposes the root of this problem with regard to the premium publishers; "use it’s [R/F] capability to qualify those with time visible, page position, share of voice, etc." Taken in reverse order, the premise that selling "remnant" becomes a non issue and premium publishers can return comfortably to the business of doing business.

For the rest of the publishers that are bound by the 80%/16% consumer universe, Mr. Spanfeller's assertion that a big part of the problem is the notion of "remnant" ad units are killing web advertising's potential with misguided pricing is misplaced and perpetuates the lazy and thoughtless pricing models that are the the true danger to profitability from web advertising.

Harsh? yes, but to summarize the earlier points; don't offer remnant ad units if you don't have them (Bcool) and use "right metrics" (Dietz), it is really that simple. While Mr. Spanfeller is genuine in his attempt to help us isolate the dangers that pricing models pose to profitability, he has unwittingly fallen prey to the true root of the problem which is not "remnant ad units" but rather publishers should take care to define and stick to pricing models that contains measurable value.

By introducing and defining remnant ad units as he has, he is suggesting that publishers ignore the pursuit of substantive pricing models and instead waste energy battling semantics with ad networks looking for a deal. In doing so he is creating the invisible hand he speaks about with skepticism.

1) Remnant ad units did not originate with the airline industry, “back of the book” of magazines or on late-night TV (the latter 2 are more appropriately termed as "direct response units). Remnant ad units came to the fore in the newspaper industry, shortly followed by print publishing; all well before the Write Brothers took flight. In fact, remnant ad units may very well be an example of a truly well crafted pricing model. Remnant ad units were sold by publishers who had a last minute ad cancellation and instead of enduring the cost of repaginating the publication they sought to offset a potential high and unacceptable operating cost by aggressively seeking out trusted and reliable advertisers to fill the space. This practice may be a concept that is inconceivable to those who have no experience outside the web industry, but believe me when I say remnant ad units helped publishers maintain their bottom line without leaving advertising dollars on the table (thank you Sir J Walter Thompson).

2) While remnant ad units may exist in today's web industry (newsletters, emails, etc.), the reality is that there is no scarcity online, and the countless unsold impressions that are going to waste are just that—they are not being sold. It is the publishers who are package those impressions as "remnant" and therefore the publishers who are creating the invisible hands which Mr. Spanfeller accurately pointed out is fundamentally driving pricing down across the web and changing the metrics these large inventory buyers are using to negotiate. Remnant this, or remnant that, and like terms are not killing web advertising's potential with misguided pricing. It is the publishers who a assigning terms helter-skelter like "remnant" to sell inventory that could and should have been packaged more responsibly and sold accordingly.

Media companies and the so called big ad networks understand these differences, they are well practiced in finding and exploiting the amateur pricing models that todays web industry thinks are so clever. Discounting is a slippery slope, but lazy and thoughtless pricing models are tantamount to throwing bacon grease on that hillside.

If you tell the media buyer that you have a remnant, you are telling them if they buy it, they are helping to offset an otherwise lost opportunity cost. If in fact that sale does not offset an otherwise unavoidable expense, then you are simply promoting gimmickry which will certainly kill the web industry's potential to efficiently profit from web advertising.

Rick, you're right.  Lots of stuff has been tried, and yes, banners do have branding/advertising value.

You're absolutely right about the Internet and advertising-driven businesses: not very much has worked, and you can now add "selling display advertising" to the list of things that don't work.  I'd suggest strongly that entrepreneurs stay very far away from advertising-based business models for that reason.

There's simply no law of nature that says the advertising business (in any form we'd recognize) must exist.

Here's a good (blog) response to this article from emediavitals.com. Incorporates Ed Dunn's comment. Thought I'd share.

http://emediavitals.com/blog/8/are-ad-networks-evil

I think most publishers HAVE moved into the "other things to do" realm.  Saying they haven't ignores the variety of ways they have tried to increase revenues:
content integration
sweepstakes
integrated text
cross-platform integration

Fundamentally, we are having this conversation because banners, regardless of click rates, have value.  A message is still being sent and received.  Click rates are as valuable as the phone calls DR clients get on TV - thus, while they have a place in the online (and TV) world, the direct model discounts the other more valuable aspects of advertising:
return sales
brand awareness
information dissemination

If all we did on TV or all we did online was price ourselves based on "response", then there is no model that would work to keep the content providers in business.  Google's various forays into new revenue work due to size - not because they are fundamentally "BETTER" models to work with.  Google is also very quick to exit revenue models which don't work - a luxury that is also afforded them due to size.

Small sites cannot take risks on new revenue models.  I challenge anyone posting here to show me a variety of small sites which have successfully implemented new revenue models after living on ad revenues.  They are few and far between - usually existing in niches and nether regions of the internet.

Implementing any new revenue models will require making deals with those you'd hope not to - such as Google.  Why should I implement a new model, allow Google to take a portion, and hope that it will generate as much or more revenue than my old one?  Either way it's a risk, and even if it works, Google's getting rich off me, something I'm not interested in generally.

We're having this conversation because it's a good one to have.  It discusses the primary goal of most people who are reading this article - reaching an audience with an advertising message in a price efficient method. 
It also discusses the fact that alternatives MAY exist - but are only suitable for certain players on the web.

There is no cognitive dissonance that I see at work.  I would strive daily to implement a new method if I knew it would generate the minimal levels of revenue that I currently make.

Sadly, the web is overloaded with overpromise and underdeliver stories on revenue generation.  In that respect, it remains the Wild West.

Jim McCarthy

<i>"the question for the industry is not how to price it, but how to find something else to do."</i>

Common sense indeed..however, this thread demonstrates the cognitive dissonance among "old school" offline ad execs with a "horseless carriage" menatlity towards marketing and monetization in the Web domain.

Google, Inc. already demonstrated technically and financially contextual advertising science is scalable and defunct Alta Vista and others already demonstrated banner ads can't scale.

Why is we having this conversation?

My company, PubMatic, works with both ad networks and premium publishers, and I don't know anybody that disputes, on either side, that direct sold inventory is a better deal for the publisher. 

However, in many cases, campaigns purchased through ad networks have fundamentally different objectives and therefore should be purchased differently.

I'll point to the article I wrote for Ad Age on Aug 14th in response to OPA's ad effectiveness study which also failed to mention the fundamental differences between the two types of inventory.

http://adage.com/digitalnext/article?article_id=138477

If anyone wants to know why publishers think this way, here you go:

http://www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=111799

Its unfortunate how its become an us vs them debate by the OPA and its key members. The relationship is mutually beneficial and should be viewed as such.

The core issue here is that online display advertising is, for the most part, fundamentally ineffective.

It may not be all about clicks, but clicks should be some indication of whether ads are having an impact, and with CTRs as low as .05% now, it's a pretty good indicator that no one is looking.  (I don't know if Jim's "low education" data is true, but if so, it's not helping support the argument that this stuff works.)

I would even go so far as to say that nearly all online display advertising is now remnant-grade, and the question for the industry is not how to price it, but how to find something else to do.

Here's a further explication of that idea:

http://www.download-not-available.com/quick-takes/its-time-to-stop-trying-to-save-advertising

I'm confused about the fervor with which Spanfeller and others are proselytizing the anti-ad-network religion.

One of the reasons I started a display ad network was that I believed good content deserves to be well-monetized, and in our democracy an informed citizenry requires not just a free press but a profitable press.  How can we get to a point where an important article about healthcare or foreign policy can be monetized as well as an article reviewing the latest digital camera?

What publishers need is not to be Luddites and reject technologies that could help them extract more value from their audiences, but rather to embrace them and collaborate to build even better monetization solutions that the publishers desperately need.  Online audiences are just too heterogeneous for a manual sales and campaign management process to capture and extract all that value—it requires technology.

Spanfeller makes a remarkable claim that invalidates the hard work of anyone who's ever held a job as an online media planner: "On the web, ads generally perform the same regardless of when or where they are viewed."

Hopefully the Forbes.com salesforce didn't believe this, otherwise it would make for a pretty comical sales pitch: "Please advertise on Forbes.com, your ad will generally perform the same here as anywhere else."

I work for an ad network, Rocket Fuel Inc, where three of our customers (a restaurant chain, a clothing brand, and a resort hotel) have all told us in the last week that our ad network is driving the best performance of any buy in their campaigns.  By one advertiser's own measurement we are driving over $10 in sales for every $1 they spend with us.  Their other partners aren't delivering these results, and the only difference is that Rocket Fuel uses technology to select exactly "when and where" the ads should be shown for maximum effect.

I agree with the premise of pricing to demand - in fact, while I worked at AOL years ago, I was shocked at their pricing models which were premised on the company's own "perceived value" as opposed to "real value".  This, of course, led to Yahoo's price destruction during the busted bubble of 2001-2003 and the subsequent marginalization of AOL as a publishing product.

Where AOL stands today is of little consequence in the grand scheme of things, but what is important is that their pricing model remains standard to many publishers.

The basic premise of "pricing to demand" is essential regardless of whether you have limited (network TV), somewhat limited (Cable TV), or unlimited (Newspaper) inventory.  I have worked in 2 of the 3 industries, and now I'm in online.  I have never worked at a newspaper or magazine, but I do know alot about economics - supply and demand.  How you price something will determine whether or not you create consistent, long term benefits for yourself and your clients.  That, in return, will make you profitable in the long run.

What makes the web interesting is that size can determine value.  Part of the current pricing dislocation is the result of agencies putting a premium on "REACH" for online purchases.  I would contend that is a valid purchase criteria for TV, but not for online.  Trying to get "REACH" online is like fishing in large pond and thinking that you'll probably catch lots of fish if all you do is use the right bait.  You may be right from time to time, but you probably won't be.

As a result, publishers with large sites push their CPMs to the limit to "maximize" their revenue (I'd argue this is limiting their revenue by reducing potential growth of the advertising pie) - making smaller sites compete by keeping their prices lower.  This means smaller sites have a harder time reaching revenue levels that are profitable.

My belief is that if agencies were going about their business well, they would seek out smaller, highly targeted sites and purchase them first - even at a small CPM premium - then purchase the larger sites.  Why?  Because putting the onus on the larger sites to lower their CPMs is what will drive the agencies' ability to truly achieve the "REACH" they are seeking.

In addition, it is common sense to realize that smaller, targeted sites are better for clients who are seeking a good result for their ad campaign.  I recently ran a campaign for a client seeking a particular audience.  I have a number of small, targeted sites meeting their needs.  In order to prove my worth, I sold a $2.00 CPM and got a 1% click rate.  While I didn't sell on a CPC or guarantee a click rate, any analysis can show that with a 1% click rate has a value of $4-10 on a CPM basis, depending on the client.

Highly targeted, and very small, sites can provide the kind of response clients are looking for - which can then be "topped out" with low CPM rates from larger reach sites.

As it stands, pricing models that currently exist are killing the smaller players in the web arena.  Larger sites demand minimum budgets ($100k per month, no less) and will not lower their CPMs appreciably to allow advertisers to achieve reach.

A quick story to finish - I once worked at a cable outlet which had pushed their CPMs to the upper limits.  They couldn't figure out why their revenues were falling, because they had "valuable inventory" that was being sold to DR (Cable's version of remnant).  I came aboard, lowered prices, reduced DR, and got more sold nationally.  At the same time I reduced a 2 year backlog of Audience Deficiency Units which had built up.  We saw a 16% increase in revenues that first year - while many on the sales team complained that it wouldn't work.

Online needs to clean up its act….and pricing is the place to start…but the agencies have to start doing their jobs properly, too.

Jim, great piece with points that really need to be said…...publishers have to charge a premium/fair price to make this medium work; and great content will attract quality readers/buyers which deliver back to the advertiser the roi needed….free is really not free , ever!....Wilma

It would seem to me that one of the primary concerns of online publishers is getting agencies and clients to shift more and more of their advertising budgets over to the online space.  However, what you suggest is essentially going to these clients and stating "Hey, do you like the lack of clear ROI you're currently getting with TV, radio and print?  How about shifting that to online?  We too have no clear ROI or definitive metrics for success, and as an added bonus, you don't understand the medium at all!"

Not especially persuasive.  The sort of collusive price floor you're advocating may be feasible at some point, but it seems more attainable when advertisers have shifted more of their budget online, are satisfied that its performance is at least as good as offline, and online publishers aren't so focused on squeezing every last dime out of their page views just to keep the doors open.

Thanks all for the comments.  Keep them coming. 

BCool, thanks for your wonderful summation.  I wish it was as obvious as you suggest.  We would all be much better off.

As to this last comment by John Dietz, I have to say I mostly agree.  Although routed in offline thinking, the notion of reach and frequency online is something that I think we will have to get to.  Both as a determination of branding value AND as a way to parse internet advertising spends next to offline advertising spends.

We do indeed have ways to measure branding success (and yes Ian, branding is advertising and thus has vastly differant characteristics then DR, like frequency for one) but they are not adaptable to offline measures.

And finally the issue is not that publishers do not have data about their readers nor that they do not use that data to help sell their sites.  Rather it is when a publisher unknowingly shares that data with an outside vendor and that vendor is completely non transparent to the end user.

There are certainly some salient points here, but I think what you've missed is understanding of the metrics unique to online advertising that can lead to a better ROI for branding campaigns (since you correctly pointed out the failing of click through rates).

Once you throw out clicks, and devalue impressions (because an impression is really a measure of the ad server placing the ad, whether the user saw the ad for 30 seconds, 1 second, or 0 seconds because it was below the fold), you have to look at what's left.

It may seem strange, but I think online advertising should start looking at things like reach and frequency, and use it's capability to qualify those with time visible, page position, share of voice, etc.  Once we start looking at the right metrics, branding ROI can be calculated to some degree.

Thanks for taking several hundred words to state the obvious: premium publishers should not offer remnant to networks and clicks are a poor measure of online ad effectiveness. Groundbreaking!

Mr. Spanfeller, you raise a number of interesting points, but I have to disagree with your premise.  Ad prices are dropping because they have not shown real value to the buyers.  Online advertising has not been able to show true ROI. 

I also believe that your "study" on purchases through ad networks is not a real apple to apple comparison.  Yes, by purchasing through an ad network, an advertiser can pay less, but I also believe the other factor is the customer service the advertiser receives from the network.  Publishers want online advertisers to pay premium prices than they should also provide premium service to the buyers.  We constantly run into communication and technical issues when buying directly from a publisher which we do not have with the ad networks. 

I think the bottom line is that to get where you want to go, publishers are going to have to make greater investments in technology and personnel to allow advertisers to better integrate and engage with their readers.  When publishers begin to do this, they will prove their value and be able to charge what you believe they are worth.

Citing an industry average of clicks is a useless stat…when creatives and offers begin to appeal to one's demographic audience, then they will click as well…

While I agree with a majority of points that Mr. Spanfeller is making about publisher pricing methodology, I completely disagree with his comparison to the airline industry…

"The fact that we’re relying on methods developed by an industry (the airline business) that has to date not made any money in the aggregate is scary to say the least."

Having spent over 12 years in the airline industry managing various yield mgmt. groups and now working within online media at a large publisher, I can attest to a number of things that we can in fact learn from an industry that has evolved over the past 20+ years to a place that is defined by:

common data practices and technology platforms, demand segmentation and revenue maximization,  efficient marketplaces with numerous distribution channels that promote the effective buying and selling of seats, the list goes on…

This evolution required a significant amount of investment in technology, people and vision on behalf of all suppliers (aka airlines or in this case—- publishers) in addition to having to adapt their business to address the demise of the travel agency and the rise of Online Travel Agencies which can be directly compared to the advent of Ad Networks in online media challenging the relationship balance between consumer, buyer and seller.

Again, Mr. Spanfeller is indeed correct about the fact that the airline industry has not made money in aggregate, but I also don't believe that consumers would rather go back to having to pick up the phone to call a travel agent in order research and book travel…

Evolution is underway (and fast) and requires all of us to look forward/backward and across industries as we continue to adapt for success.

Tom says: "And rolling back to “demand creation” isn’t going to happen. Why would advertisers agree to a pricing model which would cost them more money with a worse ROI."

Because it doesn't actually have a "worse" return on ROI?

The problem is that online advertising measures one thing: instant sales. It's great at that, which is why it's so seductive. But that's also the most promiscuous form of sale, as it doesn't build any long-term relationship with the brand. For some brands, that doesn't matter - but for others, it matters a lot.

Mr Spanfeller doesn't like the demographics revealed by the metrics therefore publishers shouldn't price according to what the metrics reveal. Unbelievable.

And rolling back to "demand creation" isn't going to happen. Why would advertisers agree to a pricing model which would cost them more money with a worse ROI.

He has written a good analysis of why ad pricing is in the dumps but he hasn't a ghost of a chance of bolting the barn door - the chickens have flown the coop (mashup metaphor #97).

<i>For example, we now know that 16% of web users generate 80% of clicks and that this 16% represents the lower income and education segments of the total user base. Do we really want to be held accountable as an industry by metrics generated by the lowest common denominator and a minority of users to boot? I can’t think of too many successful models using these types of metrics.</i>

Shouldn't this be a clue that web advertising is being adopted mostly by the uneducated and gullible? 

In my opinion, the true misguided notion is still trying to make web advertising legit after 10+ years instead of grasping the fact web is a different animal and a new approch to marketing science must come into play. Zima banner ads are played out….

Mommy bloggers writing narratives on a product/service is more potent than a banner ad.  Discussions on a social network about an upcoming movie is more potent than a banner ad. The ability to scan content and return contextual referrals is more powerful than a banner ad. The ability to tie a product into a twitter #subject tag at the moment is more powerful than a banner ad.

Contextual analysis, social trending patterns, business intelligence - again, we are in a new paradigm…

Amen!

When publishers start actually selling audiences and their tendencies (publishers do have "vast amounts of information about their user base" that expires unused every second) instead of continuing to sell the adjacency angle for premiums, their remnant inventory won't be an issue.