Winning the Battelle, losing the war?

I was intrigued by this piece on John Battelle's thinking re online advertising's future (link via Centernetworks - thx Allen) when he said:

The problem with vertical ad networks is that until you have engagement, integration, and proof of that consumer awareness, you are just going to keep devolving down to direct response pricing, which is sub $5 cost per thousand (CPM) for an ad.

We want it at the kinds of CPMs that supported the magazine and the cable industry, which is above $20, $30, $40, $50 cost per thousand. Advertisers will pay that once they feel like they're getting that value for it, and once the media is created that proves that value, and it's not just the publisher's job to create that media, it's the publishers working in partnership with the marketers and that what we try to do it with them.

Question in my mind is why these values are not already there, i.e I am the same person online or on TV or reading a magazine, I have the same net present value of future spend regardless of the media I watch, so in theory my value is the same. Given that the TV is less likely already to serve me the Ads that are interesting to me, how come those more relevant websites I frequent aren't already getting better CPM's?

It may be true that no-one understands the online metrics, but I don't think that's the whole story - the top line metrics are fairly easy to grasp anyway by Old Ad standards. Heck, given the shift of my attention-hours alone they should be coining it!

No, I have another thought - still a hypothesis, but hear me out - the Internet is not actually a very good Ad delivery platform.

To an extent old broadcast media held me captive in the linear stream of their stories, to get to the next bit I had to sit through those pesky ads.....until channel surfing and TiVo came along, of course - but even then there's inertia because you are in that passive, listen-to-a-story mode.

The 'Web is different, it's a lean forward experience, Ads are less impactful because I just am not "doing" ads when I'm online.

So John may be doing great stuff on the tactical cut and thrust of the Risk game of the AD-field, and may eventually own lots of the real estate - but winning that battle could be irrelevant because actually the main war is on another front entirely, which is actually how to tell me stories about products I want to buy, not bombard me with Ads.

This brings me to C2B models, such as demand aggregation and more sophisticated ones such as VRM thinking, where essentially the idea is to let me have a conversation with suppliers for stuff I want when I want it. In terms of "when am I most valuable", its that moment when I want to buy that X, surely.

Run the numbers any way you like, but the question you want to ask is "what is the CPM equivalent of being there at that point", and its probably the marginal cost of customer capture, which for most industries is far higher than the 2 - 3 % average we spend on Ads as % of GDP.

But to be there, to get a CPM equivalent of say $200 or even $2000 for more valuable things - you won't get the answer "advertising as we do it now"

And I don't think you'll get the answer "advertising with every single Beacon trick in the book thrown in" either.

No, you're going to get it by by making me want to come and buy something from you, when I want to buy it. And that is what an interactive internet does very well.

Different battle. Same War though. My time and my money are a zero sum game.

So, you can all aggregate all the "me-too" vertical sites that you can find, but its like building castles - great bastions of media, towering Ad networks.

Maginot product lines

But its all irrelevant if the actual transaction is "here I am, this is what I want - who can give it to me?"

Just a hypothesis of course

Reason I was intrigued - Mr Battelle wrote a book on Google, so he of anyone wpuld surely be aware of this? Or is it a roll up and sell to the "generals of industry who want to fight the last war" play, because as he notes re why buy Ad networks today when the model is so unclear:

people don't understand them and they hope things that they don't understand will pan out.