DoubleClick's ad model doesn't click

Summary:DoubleClick Inc., one of the Web's leading proponents of pay-for-performance advertising, has stopped shuttling ad traffic through its DoubleClick Direct program, in which marketers paid only for advertising that generates clicks or sales from Web viewers.

DoubleClick Inc., one of the Web's leading proponents of pay-for-performance advertising, has stopped shuttling ad traffic through its DoubleClick Direct program, in which marketers paid only for advertising that generates clicks or sales from Web viewers.

Instead, the online advertising network and management services company has adopted a strategy of selling its entire inventory for guaranteed up-front fees - an approach that could depress stated ad rates in an Internet market where most other high-traffic media hubs typically still sell less than one-quarter of their available ad space.

Industry executives familiar with some recent DoubleClick deals said the company has been offering some advertisers rates as low as $2 per 1,000 impressions for the network's hardest-to-sell inventory. Such rates, substantially undercutting the one-time industry standard of $20 per 1,000 impressions that reach a general audience, imply that direct-marketing approaches such as DoubleClick Direct are unable to generate enough revenue to outperform even ad contracts sold at lowball rates.

"You have to look at the reality of the market," said DoubleClick Chief Executive Officer Kevin O'Connor. "If someone is willing to give you a higher price on a guaranteed basis than you could make on a performance-based deal, you have to take it."

DoubleClick Direct became a flash point of industry debate last year as marketers and publishers wrangled over the question of whether online media sites should carry advertising from marketers that would pay only if readers clicked on their ads or purchased their merchandise. Marketers argued that such a direct-marketing model represented a new tool for publishers to generate incremental revenue from space that would otherwise go unsold.

Indeed, some DoubleClick rivals continue to offer space that pays based on its performance. Ad network 24/7 Media Inc., for instance, shuttles at least one-fifth of the network's traffic through performance-oriented deals, according to company Senior Vice President Scott Cohen.

"What it comes down to is having an understanding of direct marketing and technology," Cohen said. "We've done well with that."

'Direct' could return
DoubleClick's approach, in essence, appears to sell ad space at prices that the market can bear while developing tools and enhancing systems designed to boost those ad rates. "We're getting more and more demand for inventory as we find more ways to segment our audience," said O'Connor, who added that DoubleClick Direct could return under specific marketing conditions.

DoubleClick now is engaged in a full-court press to develop additional ways of slicing and dicing its ad inventory to create new target audiences of value to marketers. In recent months, for instance, the company launched systems that can segment users based on their country and their metropolitan area.

Other companies are looking at ways to increase ad revenue by providing a broader selection of formats for marketers to reach consumers. The Microsoft Network, in the past three months, has developed a menu of 112 options -- such as ads appearing mid-page or links to digital brochures -- from which marketers can choose, said Charlotte Guyman, general manager of sales, marketing and operations at MSN.

"It's very much a buyer's market if you just want to go out and get impressions," Guyman said. "We have to understand the business needs of advertisers and offer something unique to meet those needs."

Topics: Tech Industry

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