When marketers look at advertising channels this way, they will realize that it maps to the stages of the journey/funnel. What would happen to the advertising landscape? Marketers might begin to think of media this way… How can they not make this move at some point in the not too distant future? New Media Channels Working out the math, that offers a great revenue boost, and, this should be a 50% margin revenue. Let’s also assume a $40-50 CPM per 30 seconds (highly reasonable in today’s addressable video environment). Netflix reports the average viewer watches 2 hours/day on Netflix (although they don’t say how many users that is daily). a highly palatable 10 minutes/hour), assume 70% of subscribers opt for the lower ad-supported subscription price (what is reported about Hulu). Why? Assume Netflix adopts the same ad load as Hulu (i.e. subscriber growth is starting to stall (and stock price down 25% from its high), offering advertising has the potential to DOUBLE or TRIPLE their annual profit of about $1.2 Billion (2018). Now, what’s in it for Netflix? At a time that their U.S. They claim viewers in well over 100 countries so they offer a global media choice based on individual profiling…just like Google, Facebook, and Amazon.Their subscriber base in the US is about 50% of TV viewing households so there is a great potential for delivering reach.Because all their media and ad serving are trackable at a user level with matchable IDs, they can prove lift as well as anyone else in the addressable world.Netflix knows more about hundreds of millions of people’s individualized entertainment interests than anyone else…this creates the opportunity for data-driven personalization to address the right brand-building narrative to the right person. Brand marketers are thirsting for a powerful, proven way of using digital to drive brand that can balance off the rush to performance marketing.Netflix will lead the next disruption in the advertising/media landscape, focusing on the other side of the marketing equation…brand building. Who could have better assets to drive performance marketing? And, since my prediction, Amazon ad revenues have grown from a little over $2 Billion to being north of $10 Billion, and likely to continue rapid growth. Watch out…Netflix will produce the next sea change.Īs we move to data-driven, personalized marketing, it was obvious to me that the data assets of Amazon would instigate a new segment of “retailers as adtech”. It's risky for the publisher, though, because they have to rely on the advertiser's ability to monetize the traffic.Over two years ago, I correctly predicted that Amazon would transform the advertising world. Then you pay for the actual traffic you're getting and it's up to you how much value you'll extract out of it.Įven less risky is the CPA (cost per action) model, where the advertiser pays every time the user performs an action (registers, makes a purchase, etc.). You get a bit closer if you're basing the remuneration on clicks (the CPC - cost per click model). It's hard to tell how well the traffic will convert and no CPM calculator will tell you that. It's loosely tied to value, so advertisers can't be sure how much value they're getting. The CPM model has the virtue of being very simple (in all regards – how easy it is to understand, implement, and bill) and clear to all parties. What may interest you more is one of the reversed equations:įor impressions (how many impressions you're going to get, given your budget): So the CPM formula is CPM = 1000 × cost / impressions. Since CPM is the cost per thousand impressions, then you simply divide the cost by the number of impressions divided by a thousand. The formula for CPM is as simple as the concept behind it.
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