Reg Sorgatz has a fascinating interview with the founder of 4chan, a forum site that has fed/spawned the creation of memes like LOLCats and RickRolling.
For our purposes, we’ll stick with the numbers: The site does roughly 300 million page views per month and Christopher Poole, the founder, says the site barely covers the $6,000 a month hosting bills:
“About $6,000 per month. That’s actually not too bad for a site that is all rich media and has 300 million pageviews. I don’t have any overhead past that. I don’t have any employees. I don’t have an office.”
If we assume the site breaks even at $6,000 a month that means the eCPM of the site is $0.02.
Now you can laugh but huge proportions of the Internet’s ad inventory from a volume perspective yield exactly this. And the creation of inventory on this scale, whose impressions are willing to be sold for these amounts are the root cause of why there is a monstrous supply imbalance in the online advertising industry today. This means that large publishers who turn to ad networks get amazingly shit CPMs as their inventory, because it is being masked to the advertiser, is being lumped in with the inventory of sites like 4Chan. Or a user, who is thinking about a Netflix subscription and who reads the New York Times and visits one of 4Chan forums, is valued at exactly the same price by Netflix.
That in turn leads advertisers to wonder why if the large publisher is giving 70%+ of its inventory on a volume basis to ad networks, it should pay 10-20x the price to directly deal with the sales force. And hence we have the conundrum that has been facing the online advertising industry for the last 10 years (not just now, but through thick and thin).
