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End of the CPM Experiment

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The flag bearer of display advertising was always Yahoo. Their massive sales force stoked 15 years of equity into “the web banner.” Yahoo arguably had the greatest hand in providing the economic foundation for the entire web for many of its formative years.  That is why nothing better symbolizes the collapse of that foundation better than Yahoo’s appointment of Marissa Mayer over Ross Levinsohn as Yahoo’s CEO.

Yahoo has handed the keys to their crumbling castle to a Search professional. A company previously focused on reach and frequency is now run by someone that spent a career in user centered design and experience. For all the media Yahoo sold and all the technology it bought, none if it will be integral pieces of its future.

During the CPM experiment Yahoo lead the way in revenues derived from web banners and a number of display strategies from using Search data in display, to its newspaper consortium to exchange based buying – and everything in between. More than any digital media company Yahoo strived to connect Madison Avenue, Hollywood and the web in order to get massive TV budgets to move into web advertising. In many respects that was what the entire experiment was all about.

What we know now, what time has shown, is that TV budgets are not coming to web banners. The digital ad freight train is a cost-per-click model  (ultimately converted by advertisers to a cost-per acquisition/lead) where advertisers pay for performance of the advertising. Advertisers are always going to measure returns as best they can. In many respects it is amazing that arbitrary CPM based impression fees in digital lasted this long.

Quite simply, what the CPM experiment failed to prove is that the digital as a paid (paid is the operative word here) channel is as good or better than other available channels for demand generation. At the same time what digital has proved is that it is the best channel ever created for demand capture.

Despite being on the front lines of falling CPMs Yahoo was unable or didn’t try to craft a cohesive performance based ad strategy. In the meantime it was continually stepped on by a number of competitors in areas it had at one point or another locked up on the web. Google in Mail. EBay in commerce (recall at one time Yahoo Store was the largest of its kind on the web), Craigslist in Jobs, Instagram in Photos. Yahoo wasted the web’s most incubatory period because it believed above all else in the future of selling impression based media as the core revenue driver of its business.

Meanwhile at Google Marissa Mayer was focused one thing. The user. She led UX there spending time understanding the behavior of searchers and how to build an experience that leveraged it. She led the charge of A/B and Multivariate testing in Search and created the testing culture that will always permeates Google.

“When I first started testing in 2000, we tested once a month. Now, we're user testing almost every week.”

-Marissa Mayer, Oct. 2002

By May 2008 it was estimated Google had 10,000 people constantly conducting tests. It was measurement and performance that drove Google’s growth. It is also the world display advertising is moving into. Display ads will not disappear. Standard formats will not go away. What will change are the underlying rule sets that power the ad matching decisions.

What Marissa Mayer understands serves as a great hope for Yahoo. Search is the OS of the web. Searcher behavior can be used as logic into an intelligent and responsive system that becomes relevant and helpful to people. In that way it delivers enormous media value. It delivers all things that the CPM experiment was never able to. The experiment may have failed but a different one that succeeded. Yahoo is only the beginning. Every media company will at some point be forced to face the performance future. Yieldbot is here to help them.

 

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