Step 1: Navigate to Crate & Barrel, put an item in your shopping cart and abandon the transaction.
Step 2: Navigate to pretty much any Entertainment site on the internet. The more borderline the better – since these sites do not have their own sales teams and do not have the contextually relevant content that command strong CPM’s from the adnets / advertisers.
Step 3: See a Crate & Barrel ad served from Google (probably indirectly through Adx).
I wonder if Crate & Barrel is ok with their ads serving on sites like Evilmilk.com and wwtdd.com? I’m sure the inventory is cheap to the adnet (facilitated by Google Adx) probably $0.25 – $1 CPM (to Evilmilk.com). At that price and with re-targeting it probably converts incredibly well. Everybody is making money.
What’s the problem?
Crate & Barrel is most likely paying $2.50+ CPM for these re-targeted IMPR’s no matter where the adnet is finding the user. The adnet is likely making a very strong margin between what they are paying for the inventory and what Crate & Barrel is paying them. These being re-targeted users the ads are likely driving strong sales and ROI; especially when compared to a less targeted ad and/or an IMPR at a higher CPM (on a more premium site).
Effectively more premium IMPR’s on safer sites are more expensive and are less valuable in terms of margin to the adnet. These borderline entertainment sites are exactly the site inventory where the adnets make the most money – this is where the most revenue can be captured (margin) between what the advertiser is paying and what adnets have to pay publishers. 50%, 60%, 70% margins – this what arbitrage and being an adnet is all about – this is optimization.
Living with Contradiction
In the offline as opposed to online you don’t find Crate & Barrel ads on the Howard Stern show, Maxim Magazine, Spike TV, or the National Enquirer. You could argue Crate & Barrel customers read Maxim, listed to Howard Stern, watch Spike and read the National Inquirer; and with a little data Crate & Barrel could reach their customers here. But Crate & Barrel does not buy advertising on borderline entertainment content in the offline.
Is this just a technology thing? Once radio / TV / Paper / Magazines all have an IP addresses and Cookies will content no longer matter? Hello Ipad, WiMax, 4G, Boxee, and Internet Radio.
Maybe there is something else / Maybe brand matters?
From what I can tell Crate & Barrel has made a tremendous effort to keep their brand premium in TV and Print mediums; I wonder if Crate & Barrel knows that their display ad strategy (by design) pushes ads to the lowest common denominator / lowest CPM content.
The question has to be – is it worth risking your brand image running brand ads on borderline content if this is where your audience is / if this is where the best ROI can be achieved?