Friday, September 11, 2009

What's a visitor worth? A house of cards market and an end in mind

Having been bombarded recently by cable and telephone direct marketing offers for TriplePlay and Three-fer bundles, I figured, why can't I make a triangular offer? So here's part three of the September online ad posting bundle. In it, we attempt to answer the generic question: What's an online visitor worth?

image source: HHMI

For those new visitors, which is most of you according to my Google Analytics reports, Part 1 and Part 2 dealt with the numbers surrounding online advertising on social networks and Nielsen's impending inclusion of online TV viewing numbers in their ratings reports, respectively.

So what is an online visitor worth? $41.06*

*based on the current value of the US dollar. So don't delay...lock in your pre-devalued-currency pricing today!

How's that?

In a recent issue of Forbes magazine (09/07/09), they examined online advertising data from eMarketer and EquityThink. Looking at the top 4 online properties (Google, Yahoo, MSN and AOL), which collectively represent 27% of online ad revenues globally, I looked at their ad revenues against their monthly unique visitors (adjusted for US visitors derived from comscore data). The table looks like this (all revenue and visitor totals are for Top 4 properties):

So advertisers are, collectively, valuing a unique visitor to the top 4 portals at $41 worth of online advertising.

Of course, the math is neither precise nor accurate given that many sites represented in the 73% that are not Google, Yahoo, MSN or AOL don't have advertising revenues reported very accurately. And of course the total unique visitors in the remaining 73% surely are mostly the same as those in the top 4.

In other words, ad revenue and unique visitor numbers are estimates built on top of estimates with assumptions integrated. Think of them as the metrics equivalent of Collateralized Debt long as we all agree to buy into the same assumptions and estimation methodologies, we may find a consistent market value to mark to.

So What?

The point of this exercise, beyond occupying a few minutes this morning attempting to bring a Golden Triangle-like completion to a week's worth of postings, is to highlight a means of benchmarking answers to questions about investing in online advertising.

If you are thinking of running multiple campaigns for search or display, how much are you willing to pay? What's the value of getting someone to click? The answers depend critically upon what your objectives are, what a transaction value is, what loyalty or revenue goals are. But for online branding campaigns, social media experiments and acquisition campaigns, it may be helpful to at least have an idea of what the market says a visitor is worth.

You can divide unique visitors anyway you like. You can factor in deflating ad costs, assign factors based on each visitor's time spent, or you can adjust for the special value of the unqiue visitors you think your campaign will attract.

The bottom line is that to answer what a visitor is worth in terms of ad spend, you have to start with a reasoned sense of what the marketplace says a visitor is worth. But you must end with what you think the visitor's value is.

No comments:

Post a Comment