Grab an oar and start paddling if you want to ride the raging rapids of contextual ad revenue. Bidding on search engine keywords and placing relevant text ads beside a user's search results has proven so successful for marketers that by the second quarter of 2003, the format accounted for 31% of the $1.66 billion in total online ad revenue, nearly tripling since 2002, according to PricewaterhouseCoopers. And there's even more good news: You don't need to wait for the hotly anticipated Google IPO to cash in on keyword search. According to many publishers, large and small, the contextual ad programs set up by the major search engines and some ad networks are distributing the largess generously. But will it last?
Contextual advertising simply tries to spread the magic of keyword ads from the search engine into publishers' pages where they can capture people who are actively browsing related content. The model takes the ad links that advertisers bid and pay for on a cost-per-click basis at the search engines and places three to five of them in skyscraper or banner spots next to relevant content, with the search engine and host site splitting the revenue. To clarify, "contextual advertising" is a misnomer and it may be more than a little arrogant of search engines like Google to suggest with this label that they created the idea of putting ads adjacent to relevant content. Isn't that what most advertising does in most media?
But hey, why pick nits when publishers seem happy enough getting surprisingly hearty revenue streams on their excess inventory from Google (AdSense), Overture (Content Match), Kanoodle (ContextTarget), and similar programs from ad networks like IndustryBrains (IndustryTarget)? Google distributes AdSense to tens of thousands of publishers, from blogs to Weather.com, while Overture focuses on a few big accounts including MSN, Yahoo! (Overture's parent company), Edmunds.com, and the MyFamily network. Kanoodle just signed CBS MarketWatch up for contextual ads, and IndustryBrains serves contextually relevant links to major tech and business sites like BusinessWeek.com and Ziff Davis sites.
"Contextual advertising is as ubiquitous as search," says Seth Berkowitz, VP of business development at Edmunds.com. And Berkowitz can attest to its effectiveness. He not only partners with Overture to run contextual ads on his own pages, but through Edmunds.com's promotional keyword, he also buys on other search engines to see how well contextual ads push traffic to Edmunds.com when they are placed around the Web. "It may contribute 20% to 25% of the total traffic Google delivers to us for search," he says.
The New Gold Rush?
In fact, at the moment, it is hard to find a major publisher who is not excited about the found money contextual advertising seems to represent. For white and yellow pages provider Switchboard.com, running Google links on 60% of its massive site "is a significant stream of revenue for us," according to Mark Canon, VP of business development. "We're very happy with the revenue." Automotive Web site Edmunds.com is only running contextual ads from Overture on its used car pages for now, but Berkowitz already sees the potential. "It certainly won't be the major business driver, but, when fully realized, it has the opportunity to contribute 5% to 10% of our revenues." Scott Zucker, EVP of Intelligent Content Corporation, saw $11,000 monthly revenue within three months of putting AdSense links on half of the 2.5 to 4 million page views on his PetPlace.com site. "It's a hundred thousand dollar a year revenue stream for using approximately the space of a marquee-sized ad," he says. "I'm thrilled."
"For smaller sites, it is hundreds of dollars a month, and for larger ones it can be hundreds of thousands," says Kurt Abrahamson, director of content media at Google. Erik Matlick, CEO of IndustryBrains, says, "We have a couple of sites in the $50,000 to $60,000 a month range," and the cost-per-click on ads running at well-targeted tech of financial sites can run as high as $8. An Overture spokesperson confirms that some of its large accounts are realizing similar levels of monthly revenue, and the company estimates that the contextual ad market could reach $2 billion in the next few years.
Of course, wherever there is money to be made (or lost to a competitor) there is sniping between vendors about their various technologies and business models. Google has cast a wide net, inviting just about any site to run the AdSense program. To serve so many publishers, Google relies on its search technology to scan any content page on the fly and find ad matches, although with some big partners like Switchboard.com, Google matches ads through content indexes provided by the partner.
Overture claims that the spidering approach results in too many ads showing up next to inappropriate content (i.e. a knife store ad beside a news item on a stabbing). Instead, Overture relies more on content indexes and human editing to provide partners, like Edmunds.com, with reliable matches. Overture works with a small collection of major content brands to ensure advertisers "high quality leads from high quality sources," says a spokesperson. "We will continue to very thoroughly assess the quality of and very carefully select the publishers we accept into our network," the company says.
IndustryBrains uses indexing within a site's own content management system in order to match ads, and it lets marketers choose specific sites within its select network of tech business partners. Alonna Doucette, VP of online development at NetworkWorldFusion, an IT news and resource site, chose IndustryBrains over the search engine alternatives because "typically the CPC is higher, which is more revenue potential for us, and because they are not mixing consumer with business-to-business sites."
To be sure, the effectiveness and return on contextual ads and the technologies that drive them vary across different types of content. Canon believes his partnership with Google works as well as it does because Switchboard.com visitors are very directed already, usually looking for vendors and also likely to click on yellow pages that are themselves paid vendor listings. For highly focused content like the auto information at Edmunds.com, Berkowitz says that he has found it best to give his search partner, Overture, an index of the hundreds of car makes and models discussed on individual pages, so the engine can feed his pages highly reliable results that are directly relevant to a page's content. "Crawling pages is a lot better for media sites that don't have a focus on any particular vertical."