If The CPM Advertising Model Doesn’t Work For The Likes Of Murdoch Can You Imagine What It Does For The Likes Of ftm?

Philip Stone November 19, 2009 Follow on Twitter

An advertising agency contacted ftm recently and suggested a cpm deal for a campaign it was about to launch in the UK. We told them we had bad experiences with cpm models (not worth the effort) but for a fixed price of 1,000 Euros a month they could have a banner on the home page and the new pages for our daily stories. And then we got back their math!

The account representative had wanted originally a cpm deal at $0.27 (27 US cents per 1,000 page views) and so in response to the request for €1,000 she replied, “If you could send over around the level of 1 million page views a day for €1,000 a month – and guarantee it – I believe we could move forward.”

Now, friends, I have to tell you that popular as our site may be we are nowhere near 1 million page views per day. The ad agency did its math on our proposed UK page views and told us what we were asking for translated into a cpm of around €10 ($15) and that simply was not on. “I don’t see a way to work with your amount of traffic,” the account executive wrote.

Now, we knew that -- we tried before the cpm route and swore never to do it again. This ad agency was only interested in raw numbers – not the demographics, the type of people who read out site, etc.  – just large raw numbers. A site such as ours dedicated to a particular trade – the media – rather than to general news that attracts everyone, just does not draw the traffic that low cpm rates require to make any decent  money, and that is why we switched to the fixed amount route, with some success, but obviously not in this case. Now you understand why sites try to take you to as many pages as possible – two or three pages for a complete story, for instance -- just to get those page view numbers up.

But given the cpm rate the agency proposed to us it becomes quickly obvious that only the very largest sites on the Internet, drawing millions of page views per day, can hope to make some real money via cpm, and even then not that much. Now it may well be that big sites get a higher cpm, but if you use that  $0.27 cpm on the 3.5 billion page views that US newspapers deliver each month that comes to just $945,000 revenue. Most UK national newspapers get between 100 million – 200 million page views a month so that would translate into revenue of $2,700 - $5400 for each of those newspapers. How is a specialty site like ftm supposed to make money with numbers like that? No wonder even Mr. Murdoch doesn’t want to give away his news anymore!

Site owners have difficult choices to make these days if they want to stay in business. Ego says that you want the largest number of people globally reading your product and that means not charging for the site. But if you want to make some money and still have the site without charge it means taking advertising and yet obviously the cpm model at the rate proposed to us doesn’t work, and it could be argued it doesn’t work, either, for the very largest sites, too. Other types of advertising may well pay at higher rates but for the small fry like us those deals don’t cross our doorstep very often, so what to do?

Basically, you put ego to one side and pragmatism takes center stage. You start charging for content. End result is you lose around 95% of your readership, maybe more, but for those who like what you produce and are willing to pay to read that each day you are ahead financially.

That’s what we did at ftm – we keep costs to an absolute minimum and for the past month or so the site is available only to paying members, except for the home page and the topic pages.  Readership is way down; revenues are up.

And that is what will probably happen with the Murdoch media web sites that he intends to make pay sites. James Harding, editor of The Times, said this week that the News International newspapers planned to charge a monthly fee rather than a fee per story – we, too, found that to be the best way. In making such a conversion The Times could well lose more than 100 million pages views a month but profitability will increase because for those page views that continue the access is by paying customers, and at the end of the day in a business sense, rather than ego, that is what really counts.

The owner of another site which also caters to a select interest group recently asked how to bring in some money just to cover costs, and he was given the speech about choosing between ego and money. Within 24 hours he decided that ego wins the day, and so it goes.

Murdoch has made no secret that he is lobbying other news organizations to stop giving away their news, no doubt because he fears if there is even one major news site still available for free (like the BBC) then people will just go there in droves and not pay to visit his sites. The truth is there will always be news available for free on the Internet, the key to success is to have material that no one else has and that people are willing to pay to access.

That means investing in the journalism that provides such exclusive material – whether it be news or more likely analysis – and could it not be argued that is why the subscription sites for The Financial Times and The Wall Street Journal are successful? Or are they special cases, products oriented to executives who can expense account their subscriptions?  

Already there are experiments out there – Newsday, for instance, charging some $260 a year for non-print subscribers – and no doubt other pay systems will be tried with different numbers. The big question out there is whether newspapers have muddied their water so much over the years by giving their news away for free that will people now be willing to for what was once for free. The answer is that some people will; the real question is really whether enough people will?