CICM Interview: Rusty Lewis on new CP5 advertising options
January 13, 2011 in College Media News, College Publisher
In the wake of College Media Network‘s announcement in late December that they were changing their business model, most of my attention focused initially on the fee structure that would exist for current and new clients. See interview here. Now, I turn attention to the second part of the announcement, the change to the College Media Network ad revenue sharing structure. Here’s the part that deals with the advertising revenue splits. #
Newspapers will have more choice with managing online ad inventory by selecting one of the following on an annual basis: #I have an e-mail in to Lewis with a number of questions related to the new revenue sharing options, and will post it as soon as he responds. In the meantime, any thoughts on the new structure? #A. CMN and the newspaper will share the inventory among all 5 ad units with a 70/30 breakdown. The newspaper will be able to utilize each ad placement up to 30% of the page impressions. Each party will retain 100% of the revenue made off the campaigns placed on the site, but any unused inventory on the newspaper-side will be filled with remnant ads (of which the newspaper will receive 20% of the revenue).
B. CMN will sell all 5 spots and remit a payment of 20% of the total revenue to the newspaper. #C. The newspaper can buy the entire inventory from CMN at a rate of $7.50 per 1,000 page views. Naturally, the newspaper would retain all the revenue from the advertisements placed on site. #
While license fees are billed up front on an annual basis, revenue sharing provides an opportunity to offset that cost acreoss the year. #
This is the type of flexibility that some of us urged them to consider when they were under Viacom ownership; unfortunately, their leadership then refused to even discuss changes to the advertising model, and many larger college college papers seeking to increase online revenues (like mine) left the network.I'm not sure how well this current model will work for many papers. CMN is giving papers 30% of the page views to sell locally, and will pay them 20% of the revenue on the 70% of page views CMN retains to sell. For most papers, that won't amount to a lot of money.And then for papers which want to sell all the ads on their own — to serve customers' needs and presumably to make more money — the paper has to pay $7.50 per thousand page views to "buy" the inventory from CMN. College papers typically sell ads in the $8 to $15 per thousand range, so sharing 50% to 95% of the local revenue with CMN is *not* going to work for most. (And it's not realistic — nor reasonable to advertisers — to jack up rates to $20 or more per thousand.)I don't see a problem with letting papers buy out their inventory from CMN, but the price point they've set seems too high. If CMN is selling the inventory, they're sharing 20% of the revenue with college papers, so they need to be selling the space at $9.38/M, net, or $11/M gross before agency discount, to end up with the same $7.50/M in profit. And there is no way that they are currently averaging $11 or higher gross on their ad spots. Some CMN sites I see have their ad sports filled with Google ads, which pay significantly less. Even if Access Network begins selling network ads, I can't believe they'll be able to sell out the network, let alone at that price point. So why are they asking college papers to pay so much for the ad inventory? As I see it, CMN will make more profit from college papers buying back inventory than they stand to make selling ads to national advertisers, and that seems wrong to me.
Hey Eric, I will address some of the particulars you cite in the second paragraph of your comment in my responses to Bryan's questions…so stay tuned.However, I did want to correct your concerns around the option for newspapers to "buy" their inventory from CMN. The $7.50 CPM is what newspapers will pay on page impressions. That cost is designed to be spread across multiple ad units (for example, 3 ad units being sold at a $2.50 CPM or 5 ad units at a $1.50) in order to allow newspapers the room to markup ad placements and make a profit. Essentially, if CMN were to fill all the ad units with ad networks we would net about a $7.50 CPM total. We recognize most successful [lucrative] online ad sales are happening on the hyper local level which is why we have created this particular option. We are simply asking the newspaper (in order to have free run the entire inventory) to assume the risk of selling out the inventory at a much higher CPM and pay CMN the baseline revenue an ad network would yield.Heck, if CMN has a national campaign we’d like to run, we will simply buy the inventory from the newspaper at their adjusted rate (provided there is markup left over for us).The overall goal here is to simplify the management of this shared inventory. Not every newspaper can execute well with this business model which is why we designed three options: you sell it, we sell it or we share it.Furthermore, if this option doesn't work out for the newspaper as intended, we are enabling newspapers the ability to change their advertising option on an annual basis.
Rusty, thanks for the clarification. One suggestion I'd make for future enhancement to your offerings would be to create more of an in-between choice between having a 30% share of all ad positions and paying for a 100% share of all ad positions. Many college papers might find it helpful to have more traffic, or all the traffic, for one or two ad positions, but not all five — and being able to carve up the inventory in that way could make both CMN and the paper more money. I realize you could potentially get into a matrix of choices which would be complex to explain and to administer, but perhaps there could be some sort of sliding scale which would enable more papers to see themselves finding a good fit with CMN. Just a thought…
Rusty, thanks for the clarification. One suggestion I'd make for future enhancement to your offerings would be to create more of an in-between choice between having a 30% share of all ad positions and paying for a 100% share of all ad positions. Many college papers might find it helpful to have more traffic, or all the traffic, for one or two ad positions, but not all five — and being able to carve up the inventory in that way could make both CMN and the paper more money. I realize you could potentially get into a matrix of choices which would be complex to explain and to administer, but perhaps there could be some sort of sliding scale which would enable more papers to see themselves finding a good fit with CMN. Just a thought…
Rusty, thanks for the clarification. One suggestion I'd make for future enhancement to your offerings would be to create more of an in-between choice between having a 30% share of all ad positions and paying for a 100% share of all ad positions. Many college papers might find it helpful to have more traffic, or all the traffic, for one or two ad positions, but not all five — and being able to carve up the inventory in that way could make both CMN and the paper more money. I realize you could potentially get into a matrix of choices which would be complex to explain and to administer, but perhaps there could be some sort of sliding scale which would enable more papers to see themselves finding a good fit with CMN. Just a thought…
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