sst! Wanna make some quick cash? Here, take these search engine text ads and run them next to some of your own relevant content. They precisely match the topics on that Web page of yours over there. Don't worry, we checked already. We'll give you a cut of the per-click fees the advertisers pay us. Go ahead. You'll see. You'll cash in, buddy.
Essentially, this is the pitch that major search engines like Google and Overture are making to publishers these days. Letting advertisers bid to run ads off of keywords has proven so successful at some sites that they are running out of ad space and have reached out by looking to place contextually relevant ad links on content sites around the Web. And oddly enough, the early returns suggest that for now the scheme is actually generating revenue for publishers.
"I'm thrilled with the results I get," says Scott Zucker, EVP Intelligent Content Corporation. Since last August, he has participated in Google's AdSense program; his popular PetPlace.com pet information site runs these links in a skyscraper bar along the right side of its pages. PetPlace serves up to 4 million page views a month, and Zucker has the Google ad links run in about half of them. He started making money right out of the gate. "Between August 25 and August 30, it generated over $1,500 in revenue," he says.
It got better from there. In September, PetPlace reaped about $8,600, and then $11,000 in October. For Zucker, running contextually relevant ads is the proverbial no-brainer. "It's a hundred thousand dollar revenue stream for approximately the space of a marquee-sized ad."
In the post-bubble world, instant revenue is what Web publishers like to hear, so it is not surprising that players big and small are signing up for a piece of the Google action, from NYPost.com to Weather.com to the network of Primedia/About.com sites. "For smaller sites, it can be hundreds of dollars a month; for larger ones, it can be hundreds of thousands of dollars," says Kurt Abrahamson, Google's director of content media. As the program experiments with formats and deals, Abrahamson employs a lot of flexibility in cutting revenue share deals with major publishers, so he won't define the usual split. In some cases, he actually buys inventory from a site on a CPM basis to place ads.
Because all text link ads are paid by the client on a per-click basis, Google and its partners often optimize performance by tinkering with the ads' color, type face, and placement on the page and within the site. Abrahamson says that these links actually deliver better CTRs when planted deeper within a site, because as the reader drills down to content that is more granular and specific to her needs, the search engine is delivering much more precisely relevant links to a user whose interest is already very high. Many sites run links in a skyscraper format, but "on newspaper sites, the bottom of the page works fairly well," says Abrahamson. That is because news readers who stick with an article to the end are highly motivated to click to relevant material, even ads.
Zucker spends about an hour a day analyzing and tweaking the ad links Google delivers to his pages. The search engine is not perfect in scanning page content to deliver relevant listings, so he uses Google's back end tools to block certain links that might compete with vendors who already advertise on the site or that don't match his reader's interests. "On average we are seeing CTRs between 2.7% and 3.3%," though he warns that high CTRs do not translate into higher revenue. Since Google works on a bidding system, revenue delivered from different ads is highly variable, so you could have tons of clickthrough going into ads that pay poorly.
The biggest questions surrounding contextual search are the same ones nipping at all search-based ad placements—can it last? Ad agencies are starting to complain that the bidding system for buying keywords at the major search engines is inflating prices at a terrible rate and making it difficult to budget their ad buys. In the short term, this may seem beneficial to publishers because it should translate into higher revenues. But in the long term, ad effectiveness, and thus revenue, surely will slide if only the richest, most determined clients buy up the inventory.
Another very real worry is whether contextual text ads undermine the effectiveness of other ads on a page that a publisher might have sold at a hearty CPM or cost-per-click rate. The more ad units on a page the less likely a user will notice any one of them. "Publishers are concerned about their yield and how new units will affect that yield," says Abrahamson, and so many are starting off by handing to Google only unsold inventory. Search engines may be handing Web sites a nice, painless revenue stream, but in order for contextual search to work well within someone's business plan, the publishers will have a more complicated job. All site owners with existing ad sales will have to do the math for themselves on whether an ad served by a search engine partner or by themselves is more valuable on a page.