As you know we’ve been talking to folks about ad serving services/technology while enhancing our own home spun ad serving software over the past couple of months (the old pursue all options method).
From the comments I’ve gotten and our own experience it turns out that most of these services start discussions at .06 or .07 per CPM and quickly jump down to the .04 to .05 level. The more aggressive services go down to .02 to .03 (note: This is to serve your adsnot what you’re getting paid. So, this is if you had a $3CPM advertiser and wanted someone to serve the ads with tracking, stats, geotargeting, etc. Some folks were confused in the last post).
These services also try to lock you into a monthly minimum and a term (i.e. two or three yearsfor real!?).
These companies basically become your business partners and charge you a tax of 1-15% on whatever amount of money you make. It’s kind of crazy if you ask me!
This reminds me of the old days of hosting (or online services for that matter) where you would pay someone based on your consumption while they were paying on a flat rate. So, you might pay AOL or Prodigy $4.95 or $2.95 and hour for their service back in 1994 and they were paying a flatrate (or close to it).
Wonderful business to have, except as we all watched it went to flat rate. Same thing with hosting. You can pay for your traffic on a per megabyte level or you can go to ServerBeach and get a 100MBIT line into your server for $1,500 a month all you can eat.
PEOPLE LOVE FLATRATE PRICING.
PEOPLE LOVE ALL YOU CAN EAT.
This got me wondering: why hasn’t an advertising service offered flatrate pricing? Based on the CPM model we’re looking at spending tensif not hundredsof thousands of dollars a year serving up our ads.
Why doesn’t one of these services (i.e. Doubleclick, Zedo, etc) just offer you a server, some bandwidth, and their software for $595 a month? I guess they are all trying to maintain their margin, so the real question is “why isn’t ServerBeach or RackSpace offering advertising serving services for a fixed rate?”
If I was looking to get into this business that is the model I would take. Make a fixed amount on the advertising and upsell on premium service. You would undercut the entire CPM model and get all the clients. Plus you could build all this software on top of PHPAds which is free.
Heck, if someone wants to build this company I’ll invest in it and join the board!