Why Google Loves Remarketing

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Today, I’ve been going through all of our client AdWords data, looking at the aggregate CPM rates Google is commanding for both Search and Display advertising. CPM (cost per thousand impressions) is a lesser-used metric in our field today, but it can provide additional perspective as a benchmark.

That exercise reminded me that many of the dominant forms of “display” advertising in client accounts today are in the various types of remarketing. That makes aggregate figures misleading, because remarketing pulls the average CPM pricing up.

The more these higher-value forms of display advertising crowd out the lower-value stuff, the happier Google is, financially. Could it be that this will also help the publisher ecosystem? One hopes.

Just a back of the envelope calculation, but here is roughly what I’m seeing:

  • The strongest forms of remarketing are priced at 10X (or more) what display advertising is typically selling for in the case of advertisers not being particularly performance-focused on the latter
  • For less valued forms of remarketing, the ratio is still¬†5X
  • Even when advertisers are managing tightly to some performance metric (not as demanding as search, but tight) in display advertising, remarketing typically goes for 3X the price of the other display advertising, and at least 2X

Here’s where advertisers need to be careful. Remarketing is harvesting existing demand, leveraging past investments, and speaking to certain kinds of audiences. It’s “low hanging fruit.” That’s why it’s worth spending the money. But it shouldn’t be confused with a serious effort to build out display advertising. Many of us believe that advertisers under-invest in display advertising compared with peers who do it well. Remarketing isn’t really the same thing. It’s good, but it also shouldn’t be an excuse to get complacent. If you can find great prices on the regular display inventory, then there may indeed be a benefit.

As for Google, and publishers, this must be good for profit margins. There is too much near-worthless display inventory out there. Getting some of those clicks to shift over to audience-based targeting is a better way to monetize user attention… financially speaking only, of course.

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