Entrepreneurs created tools to make websites so easy and inexpensive to create that just about anyone can do it in a few minutes. If you think about this from a simple business perspective, the cost is so low to create a site, and distribute it, that the site only needs to make a very small CPM from advertising to support it (cover the cost of running it). And. If you have a really large site, that the incremental cost of serving a page is even less, so you can still make a positive gross margin and charge an even lower CPM.
I’ve made this point before. Technologist have done their job in the web publishing space. We’ve taken a market (content management/site creation) and totally disrupted it by making it so easy and inexpensive through content managment tools and hosted services. Now that we are paying less to create sites, we have to expect to make less from advertising to support them, because the competition has already done that. UGC sites at scale are supporting themselves under a .50 cent CPM. As a publisher, we have to compete at that price, or we will die over time.
There is still the cost of creating content and managing it. As these costs get greatly reduced, I think we can expect sites to charge advertisers even less. Our prediction is CPMs will continue to decrease as a function of supply increasing (time online), and as costs decrease across content management systems, creating content, and managing/programming of content.
In the end, it will be the most efficient publishers that survive.
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