Some lessons need to be repeated no matter how obvious they may appear. When it comes to online advertising effectiveness, the perennial lesson is that context is everything. The Internet is for information seekers. So, when content publishers put even the simplest and smallest relevant ad in front of the seeker, reader response—be it click-throughs or brand retention—is exponentially better than the biggest, boldest, or loudest rich media unit running throughout a site. The latest teacher of this adage is the phenomenal success of search engine advertising in 2003. Between the first half of 2002 and the first half of 2003, revenues from paid search advertising increased 300%, from $238 million to $955 million, according to PricewaterhouseCoopers.
Beyond an influx of revenue, the ad search boom brings a renewed focus on context to the Web. While many advertisers will continue to buy keywords on major search engines like Google and Overture, and many publishers now place contextual ads from these engines on their own sites (see last month's Follow the Money), this emphasis on context and relevance also calls attention to a number of alternative approaches for targeting ads at users at just that point when they are most interested in a product.
For all its success, search engine advertising has weaknesses that create opportunities for content providers and alternative advertising technologies. Because of the auction model used by major engines, some advertisers complain that the cost of buying their most effective keywords has risen exponentially and is even cutting some industries out of the market. On the user side, search results remain too voluminous and often irrelevant. As a result, Larry Chase, publisher of Web Digest for Marketers (www.wdfm.com) sees "a niche in this market for vertical search engines tAfter years characterized by half-kept promises about laser-like ad targeting, online publishing finally seems to have its technology, audiences, and ad clients lined up in just the right place to make this promise of interactive media a reality. Particularly for some smaller publishers, running contextual ads from a major search engine makes sesnse, but the bigger media players will have more (and perhaps more lucrative) alternatives that also follow the relevance trend in different directions. Next month we will look at an even more sophisticated solution for very large sites, audience management technology, which actually determines an individual user's interest and then follows her throughout a site with the ads and offers she has already demonstrated she wants. hat are highly specific to the user and they bring more inventory to the advertiser." His search engine for marketers should be online this month and he's considering a fixed price model as another means to distinguish himself from mass market brands. Others, like BusinessNation.com, are selling more targeted audiences to advertisers at what might be lower cost. By year's end, we should see a fair crop of vertical portals pitching themselves to advertisers as more efficient, better targeted, and more usable solutions.
Both the buying and selling sides of the online ad market have some reservations about the arbitrariness of contextual ad programs. When a major search engine feeds ads to a partnered content site, the advertiser has little control over where its ad shows up and the publisher is not always certain what product will pop up on its site. "We wanted to make sure we do not get merchant credit card ads," says Alonna Doucette, V.P. of online development at Network World, Inc. At her NWFusion.com site for the IT industry, she opted for context ads from IndustryBrains (www.industrybrains.com), which sells contextual ad placements to about 45 major B2B media companies like Ziff-Davis and CMP.
Unlike contextual ads from the big engines, advertisers bid on placements at specific sites within the system, so that both marketer and publisher know who is advertising where. IndustryBrains doesn't scan publisher sites for keywords but instead attaches itself to the content tagging indexes within most sites' content management system in order to match ads with relevant editorial. The advertisers bid on content categories and specific publishers rather than keywords that can show up anywhere. According to IndustryBrains founder and CEO Erik Matlick, "A publisher with premium traffic is better off with a site-specific model. A well-known site can get a premium price per click of three to four dollars." Like major search engines, Matlick won't discuss specifics about the revenue splits he makes with publishers, but he does say that a medium-sized site with 1 million to 2 million page views can net $5,000 to $15,000 a month from his placements, while his largest partners see $50K to $60K a month. Doucette from NetworkWorld.com agrees. "The CPC is typically higher—more revenue potential for us—because they are not mixing consumer with B-to-B sites and therefore can command a higher CPC rate than the usual Google or Overture networks," she says.