Yahoo have disclosed their Q3 revenues and they aren’t good, a measly 1% increase on the same period last year and down $20 million on Q2. The announcement comes hand in hand with them announcing they would be cutting 10% of their workforce to improve cost efficiencies. This is no great shock in the current economic client but it is the breakdown of revenues which shows the most interesting facts.
Paid Search and performance based display advertising, such as Right Media and their Yahoo Direct Programme, were actually up a much greater percentage than the overall picture with the drop in revenues coming from “premium display advertising”, i.e. the CPM based placements across the Yahoo portal. This ties in with what I have spoken about before regarding the future of digital media buying being a more flexible, reduced cost environment with many more placements being bought on an auction model or at the very least on a CPC basis.
There are two main causes for me believing this is the way digital display advertising needs to go:
1. The Global Economic Climate: advertisers cant afford to be paying premium CPM rates in the name of “brand building” when the economic climate is so fragile. The next 12 months for advertisers, both on and offline, is about making sure a return is gained on advertising spend, and £20+ CPM, is never going to bring about a direct return no matter who you are.
2. Advertisers are Getting More Savvy: being from a paid search background and working for a results driven agency, when I spent some time media buying I was astounded at the stunts that some publishers tried to pull with their CPM’s. Just because it is a high traffic or niche area of the site does not mean that anybody is paying anymore attention to the ad on that page than they are on the less popular pages. An ad is an ad and 99% of Internet users can spot them a mile off. Thankfully more and more companies and media buyers are now beginning to think this way too and not buying the expensive slots thus meaning prices fall. The old model of media buying also doesn’t play to the strengths of online, they make no sense. So I am advertising online, where I can review performance real time, change ads real time, but your telling me I have to book for a minimum one month period no matter how it performs? It just doesn’t add up. Publishers need to start operating in the online world rather than the offline media buying world.
So even more evidence from Yahoo that traditional media buying online is on its way out, but who can be the first to capitalise from it with an effective flexible ad platform?
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