Sharing the Wealth...Is Contextual Advertising the New Gold Rush for Content Providers?

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Tweaking for Dollars
An unanticipated byproduct of the contextual ads craze is that it involves content providers in the "dark arts" of online direct marketing, as they learn how everything from font size to color, description length to word order can radically alter the CTR on a simple text link. While most traditional ads that appear lower on a page do not perform as well as placements above the fold, at washingtonpost.com, the Google ad links do best at the bottom of news and features stories. "Our readers like to read the whole story," says washingtonpost.com's VP of business development, Cliff Sloan. And these highly interested readers are precisely the users who are most likely to click into a relevant text link. Simply eliminating some white space between the story and the ads helped improve performance, but Sloan also found that on section front pages, where people scan for headlines, the text ads work best as a skyscraper unit along the side. "What works on one kind of page may not work on another," says Google's Abrahamson. "The more granular the content, the better the ads perform. The deeper we go into a site the better," he says, because users drilling into a site's most specific content are the ones most interested in the relevant links.

Edmunds.com learned to shorten its text link descriptors, limit the number of links to three or four, and put lines between the listings for better clarity. "We have experienced a doubling of our CTRs from these optimizations since we launched, and we believe that if we integrated the ads into the site rather than the banner experience, we could do even more to drive those rates," says Berkowitz.

But don't forget that evaluating the effectiveness of online direct marketing is not as clear cut as counting clicks. Because search advertising works on a keyword-bid system, every term carries a different CPC rate so ads that get great response may not deliver higher revenues. As Zucker discovered, "I have gotten CTRs to 5%, but when I got them that high, the actual revenue dropped dramatically." Because the back end for most of these systems allows publishers to block some ads from running on their site, he now spends about an hour a day tweaking the settings so he can balance high CTR ads with higher revenue ads. "CTRs and revenue do not tie together."

But Will Advertisers Play?
Search engines and publishers may be happy about this new model for now, but the third leg on the contextual ad stool—the advertisers who finance the system—is much wobblier. At a 2003 search engine marketing conference, Brad Byrd, the director of business development at NewGate Internet, chilled audiences with case studies showing that contextual ads generally cost the advertisers more on a CPC basis than ads placed within a search engine's own search results. Worse, contextual ads often produced only a tenth of the click-through rates of search ads and ultimately deliver lower quality traffic, clickers who are less likely to convert to paying customers. Because the user's state of mind is so different when reading most content pages compared to using a search engine, there are "lower odds of catching visitors in the act of purchasing or shopping," warns Byrd.

From the beginning of contextual marketing plans, marketers have complained about a lack of control, that they had too little information from the search engines about the relative performance of the ads, and that they had to pay the same bid price on ads showing up within the search engine as they were for the ads sent out to content partners of varying quality or relevance to their products. Andrew Goodman, principal at Page Zero Media and founder of Traffick.com argues that, until recently, his only option with Overture and Google was simply to opt out of sending his search engine ads to other content. In the case of Google, he didn't know if the ad would show up on Forbes.com or a thirteen-year-old's blog. "If lower quality publishers are forced on us in the mix, then loss of control becomes very serious," he says.

Content sites enjoy good revenue from these programs in part because many advertisers pay the same high bid rate for their ads whether they are placed at the search engine or at a content site. Goodman sees that changing as more advertisers opt out of contextual programs when they bid on keywords, thus lowering the price paid for search/contextual ad bundles. "I am a publisher myself," says Goodman, "and we have seen it drop perhaps 60% on a cost-per-click basis, which must mean that advertisers are opting out. The extent to which publishers can rely on this as a source of income is still up in the air." In January, Overture formally separated the bidding systems for search and Content Match placements, a move that marketing professionals feel Google will likely follow. By letting contextual ads achieve their own natural market value, publishers may be facing lower revenues from these programs in 2004.

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