The Business Insider report that local merchants can purchase a Google Adwords ad at 1/10 the price on Patch.com’s rate card, and still get Patch.com placement isn’t a revelation. It confirms the reality of excess premium inventory that plagues traditional media display advertising, and the ease of gaming the media buy system to get the lower rack rate. The trick is to purchase a Google Adwords ad, target the zip code of the desired Patch.com site, and specify Patch.com site as a “managed placement” in the Display Network.
According to the Patch salesman in the BI article, his client qualified for a $2 CPM rack rate that beat the salesman’s $20 book rate.
The worst part is my client is getting ads at a $2 CPM and getting impressions. I saw his dashboard. The whole point of Patch was that it was local but Google just has you put in your zip codes and then your ads launch.
My client did the math and they paid $20 for a cpm when I sold it.
I don’t know how Google gets Patch ads cheaper than I do but I can’t do this any more. It isn’t fair to the clients that pay the whole amount from me.
The divide between book rate and rack rate threatens publisher credibility at a time when local businesses are demanding two types of advertiser accountability. First, they want relevancy that their ads are being displayed only to their target customer bases, not shotgun to the annoyance of the general public. Second, they want to pay only for results. CPM based display advertising, like commercials and banner ads, focuses on traffic quantity over traffic quality and delivers neither the targeted relevancy and nor a guaranteed performance based pricing schema beyond “minimum pageviews”.
Google Adwords, Twitter’s new Promoted Tweets product for SMBs, Facebook ads, and even Groupon, all deliver relevant geo-targeted consumers on a pay per performance basis. These social media ad networks will pressure traditional local publishers to match their offerings on price and accountability. The inherent dilemma is local publishers need to connect to these established social networks for the consumer profiling required to deliver relevant advertising. How do publishers staunch the flow of local ad dollars to these ad networks when they can’t offer the same kind of Facebook profile matching services?
The media companies are building their own marketing services groups to show their clients how to advertise, and use social media. The Hearst Corporation, the owner of media properties including the San Francisco Chronicle / SFGate.com, developed Local Edge, a Hearst Media Services company, to provide a comprehensive portfolio of local business marketing services ranging from Search Engine Marketing to premium directory listings. Local Edge has succeeded in signing on the media marketing arms of other publishers, like DMNMedia tied to the Dallas Morning News.
Beyond big media’s foray into developing a new marketing services layer, a new generation of startups will help local publishers compete by adding value to the ad placement supply chain. Patch.com and a number of media companies, have partnered with PaperG to facilitate the ad creation process in real time so their sales teams can accelerate closing the deal with local merchants. Many publishers work with white label deals publishers to deliver daily deals to their readers. We see new social media marketing agencies like Hearsay Social and Main Street Hub competing with big media to supply local business services. In sum, these solutions make it easier for small business to participate in a new world of social marketing that extends beyond the banner ad.