On Online Advertising Economics and the value of a PageImpression

Scott Karp is discussing Why Online Advertising Economics Are So Messed Up and refers to a recent article in the NYT about Popularity Might Not Be Enough. The discussion is pretty much summing up our considerations when we decided to start our venture called Revso.

Online advertising is based on the PageImpression and rewards portals that let people click, the more PageImpression they generate, the better it is for the portal, usually. But the overall value of a PageImpression goes down, if we just continue simply counting them. We have to acknowledge that not all sites are alike and therefore not all PageImpressions have the same meaning. When looking at blogs, you can easily see that the ratio User/PageImpression differs a lot from “normal” portals.

So, when we look at the good old fullbanner, we see that the prices have been going down steadily. The reasons are obvious. Too much traffic is generated and the attention of the user is rarely focused on the banner, which results on few clicks. Therefore the value of an AdImpression is not too good. Tim O’Reilly has some numbers showing how many PageImpressions are necessary to run a $50 mio business just based on advertising. According to his numbers, a site needs 4 billion PageImpressions a month based on a 1$ CPM. That’s a whole lot. But on the other hand, PageImpressions are dying and more and more sites are being built without generating just PageImpressions in mind. This will surely effect online advertising and the online advertising economics as a whole.

If we look past blogs and take on Social Networks, how much is PageImpression worth there, let’s say at MySpace or Facebook? How can an advertiser get the attention of a typical Myspace-user? Will they click? Will their clicks convert?

The model of online advertising is changing at a rapid pace. Revso will make sure that the user participates.

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