Given our diversity, something must tie us together beyond just the desire to make money or work in an industry that doesn’t require a strict dress code. In thinking further about the ties that bind, some things stand out while others do not. Low start-up costs are a plus. Quick results are also a plus. Working on a performance basis might seem like a factor that brings us all together, but I don’t think so.

We all work in performance-based marketing, but we didn’t seek out this type of marketing because it pays on a performance-basis. We chose it because it enables other things — like rapid execution.

If there was one thing that I would say we all have in common, it’s that we have product on the mind. Product is a slightly misleading word. In today’s advertising-technology world, product tends to describe the underpinnings. It tends to refer to code and iterations of the code to make the core site perform better, faster, etc. It is Google tweaking its algorithm or the Gmail team unveiling a new feature. It is Facebook implementing Skype or Apple updating the iPhone.

Products all, but they speak to a one-to-one or many-to-one relationship where a company has something that it continues to shape or improve for the market. Product for us is different. Product for us is really offers. Only a small handful are thinking about better subid tracking, or getting to truly real-time reporting. These wonderful few make sure the plumbing works, but the rest of us can’t get our minds off what will run.

We are the privileged few, for example, that would take pleasure watching infomercials. For us, seeing infomercials just helps us sell better. That late night bra commercial? Yes, it’s a little weird to admit to watching that at two in the morning on a Saturday night. It’s probably a little weird to take screenshots and even DVR a particular infomercial. At least to others that’s a little weird.

To us, it’s all about trying to get in the mind of the user and some sense of what offers might work well or ideas for something new to run. Much as a journalist listens to the world with a distinct filter, trying to tease out a story or a source, those in our space view the world from the lens of trying to find a new offer, tweak landing pages, and eCPM.

How many times has this happened? You are sitting in a public place, maybe a lounge, at dinner, or even on an airplane. You hear someone talking, and there is something about the words they say that attracts your attention. You can’t quite tell, but it sounds as though the person has a direct to consumer offer that has some success offline but little focus online.

It kills you because you want nothing more than to find an excuse to talk to the person or to make sure you heard them correctly so that when you get back online you can look them up and find a way to connect again. It’s like those guys who try to get a full name from a girl in order to Facebook them. We don’t want to be creepy stalkers. We want to make them money.

The hard part about so many of these relationships and chance encounters, including the intros that friends of friends make once they know you as the internet person, is that most aren’t in a position for scale. It looks promising, discussions go well, but something almost always gets in the way of a full-on launch.

These are more than business development deals. They are almost mini M&A deals, more likely to not happen than happen, and equally likely to fall apart even after the first few months of traffic. As we have no doubt lamented before, we could use a better discovery process.

There are countless amazing offers. If only there was an America’s Got Talent for potential offers — a few have toyed with a reality show.

Others wish we could create an Angel List for those with concepts and products and those with the ability to turn them into offers. As we know, though, it’s hard. How great would it be to have an industry organization dedicated to discovery. It would exist to educate product owners, to help them become more performance marketing savvy, and put them in a position to succeed when they connect with networks. That we don’t have it is the same reason why many of us work in this space – we want to have more fun and see the results of our efforts…yesterday.

Some ideas seem to have the perfect fit; they seem so groundbreaking and significant that you are positive they will work. All you need to do is build it and customers will come. You immediately dive head first into development of your idea sparing no expense on features and functionality along the way. This site is going to be perfect.

Several months pass and your product is finally ready to be released. You swell up with pride a bit as you announce to your friends and colleagues what you have created. You may have invested far more than you thought you would initially, but you know you have made all of the right decisions for your customers. The consumer’s experience on your website is exactly as it should be and you are virtually guaranteed success.

So it’s time to release the website. You buy some initial traffic to the site to see how it works, but it’s not generating enough revenue to offset the traffic cost. You double-check the technical functionality of the site and it all checks out. It must be the traffic. You segment the traffic differently and buy more. It’s still not backing out.

You have invested so much into this site you are determined to make it work. You keep spending and tweaking the site, but its just not working like you thought it would and you are still losing money or barely breaking even. You cut your losses and either let the website run with no additional investment or shut it down and move on to the next idea already in the hole from your last project and confidence depleted.

Don’t feel too bad because you are not alone. In fact, most online businesses never obtain the desired traction and never turn into hugely profitable businesses for their owners. I know this from personal experience. I have spent years developing a variety of websites and I am not ashamed to say that the vast majority of those websites have been complete failures.

What I have taken away from those experiences is that most ideas for websites will fail, those failures are a normal part of the process, and that through acceptance of those failures as a normal part of the process and being prepared for them, you can increase your chances for future success. In other words, through the creation of a lean process that gets the right products to market quickly and cheaply, you can let consumers test the idea of your website.

If they like it, their feedback and response will drive the feature set development for the end product. The process involves three major steps: pre-defining your success metrics, iterating through ideas and accelerating failures.

Pre-defining your success metrics is a two-part process. First, you need to justify why you are building the site. There are many justifications for building websites and those justifications vary greatly from one website owner to the next. Identifying your justification prior to creating a site will allow you to make sure that you build the right type of site to meet your needs and that you recognize when your site is fulfilling its purpose.

Some typical justifications include: building a marketing list, generating a new revenue stream, stabilizing media buys when ad spends change frequently across advertisers, providing value to and/or cross-selling to an existing consumer base, building a unique offering for a publisher base, and more.

Second, you need to define the competitive landscape for your proposed website. You need to understand exactly what you will have to pay for traffic and how much you will have to earn on the backend of your website in order to afford that traffic plus your margin. There are many metrics that traffic publishers are going to care about. There are open rates, click rates, conversion rates, etc., but the most important metric used by savvy publishers is effective revenue/cost per thousand (ECPM) because it factors all of those metrics together.

Publishers will use the ECPM of your website to valuate their traffic against alternate websites so they can make relative comparisons between multiple types of offerings with different conversion metrics and payouts. Each type of traffic has significantly different ECPM values as well as different associated costs to a media buyer. You need to figure out which type of traffic you are going to test with and what the typical ECPM’s are for that traffic.

Once you know competitive ECPMs, you can take the amount of traffic that you want to buy, divide it by one thousand, and multiply it by the target ECPM to figure out what your target revenue per user sent to your site needs to be. That revenue per user needs to be enough to achieve the publishers target ECPM plus your margin if you want to continue to receive traffic from that publisher and make money for yourself.

In real terms, if you are going to buy one hundred thousand units of traffic to your site, your target ECPM is $5, and your target margin is 20 percent then you need to make six hundred dollars off that traffic to both keep your publisher happy and make margin.

Search engines and search marketing affiliates get it – they need to be earning more per click (EPC) than they are spending per click (CPC), and they adjust their marketing efforts quickly and accordingly. It’s an easy set of metrics to match up.

Display publishers and advertisers can easily find some common ground using eCPM — effective Cost per Thousand Impressions.

Typically, inventory is purchased on a CPM model in display advertising. More and more often now though, the advertiser is looking to hit a backend CPA or ROI goal. If the advertiser is willing to be transparent with their reporting, or even better has a pixel to place, the publisher can easily track how many actions or leads are coming in. We can then compare that to how much is being paid for the inventory.

So here’s a throwback to the word problems of 4th grade:

Sally is buying inventory from Website XYZ at a $5.00 CPM rate, or $5.00 for every 1,000 impressions. This inventory has a click thru rate of 2%. She is advertising Offer A which has a payout of $3.00 and a conversion rate of 10%. Is this a profitable media buy?

2% of 1000 impressions = 20 clicks

10% of 20 clicks = 2 conversions

This means when you run the math for every $5.00 you spend you are making an eCPM of $6.00 – a profitable buy for Sally.

Thus, the straightforward math equation of yesteryears can bring you to this understandable solution. Common denominators are not only concepts learned through your childhood education, but also serve to discover the easy solution to profitable partnerships. The simple effective CPM is indeed the common denominator for today’s online advertising.

For years, the Web has been aggrandized as a tool for democratizing personal interactions. But it’s taken great strides in the business realm as well … and PubMatic has released data that shows just how far smaller sites have come. According to their findings, advertising on small Web sites – not medium or large sites — is significantly more lucrative for ad clients.

Today they announced the launch of the PubMatic AdPrice Index – an industry-wide measure of interactive advertising network pricing for publishers. It benchmarks effective cost per thousand (eCPM) data from more than 3,000 sites on a monthly basis.

The data was compiled by industry experts Dr. Albert Madansky and Dr. Michele Madansky.

Key findings:

•    On average, small niche Web sites (less than 1 million pages views per month) provided significantly stronger performance for advertisers than medium Web sites (1 million to 100 million page views per month) and large Web sites (more than 100 million page views per month): eCPM averages for March 2008 are $1.18 for small Web sites, $0.34 for medium Web sites, and $0.38 for large Web sites.  The large Web site segment includes a higher proportion of social networking, entertainment, and gaming sites than any other segment.
•    Pricing data reflects net publisher monetization via ad networks and excludes ad networks’ share of ad spend as well as inventory sold directly by publishers to ad agencies or advertisers.
•    In March 2008, 76% of small publishers garnered net publisher eCPMs from ad networks of under $1.00, compared to 95% of medium and large Web sites.
•    eCPMs for social networking sites are among the lowest by vertical, though they have increased 69% from $0.22 in January to $0.37 in March.  The low monetization rates on these high volume sites are consistent with recent quarterly earnings statements from Google and News Corp.

“What we’re seeing is that advertisers are relying on the targeted, niche audiences that smaller Web sites represent, leading to a significant variance in net publisher eCPMs from ad networks depending on Web site size,” said Greg Stuart, former CEO of the Interactive Advertising Bureau and member of PubMatic’s advisory board.  “The traditional industry thinking is that larger Web sites perform better than smaller Web sites because of improved efficiency, reach and brand power, but that’s simply not the case.”

PubMatic is a service that automates and optimizes ad inventory decision-making for publishers. For a complete report, go to www.adpriceindex.com.