For a decade, Web site publishers have relied on an old advertising model: Publishers provided advertisers access to readers, and the more desirable those readers, the more an online publisher could charge.
WSJ.com, for example, charges advertisers as much as US$64.60 to show a banner ad to 1,000 viewers. (In advertising language, this is called CPM, or cost per thousand impressions.) In the past these fees made sense because the Wall Street Journal's readers are highly affluent, a perfect target for many upscale brands. The better the audience, the more advertisers are willing to pay for ad space.
But what if marketers could find new ways to reach the same audience--with ads on sites that won't charge nearly as much? What if those other ads cost as much as 95 percent less?
Profiling and targeting site visitors
Online publishers face a big revenue squeeze as companies become more
sophisticated in their ability to determine who is visiting what Web sites and
when--just as marketers look to squeeze more from dwindling ad budgets.
The old online ad model is getting turned on its ear by such firms as ComScore and Quantcast. These and other upstarts specialize in such methods as so-called demographic profiling, which pinpoints the types of people visiting each Web site, and behavioral targeting, which helps advertisers reach a desired audience based on a person's past Web-surfing behavior.
Marketers can use these tools to reduce online ad costs dramatically. Say your company sells "Bidgets", a luxury product. Ordinarily you'd run banner ads on FancyOldSite.com, which reaches your target audience of men and women who earn more than US$150,000 a year. The ads are expensive--say US$60 per thousand impressions--but they reach your ideal audience.
You might instead embed a snippet of code in the banners that run on FancyOldSite.com. This places so-called cookies on the computers of everyone who sees the ad so you can track them when they visit other Web sites. That's where retargeting kicks in.
Every time a former FancyOldSite.com reader who saw your ad visits other Web sites, your Bidget banner ads pop up again. The banner ads reappear because the cookie on that computer flags a retargeting "network" of thousands of sites, saying "This desirable reader is back." These new ads are cheap--US$3 CPM--but they reach exactly the same audience.
Here comes Google, via DoubleClick
Congratulations! You just used behavioral targeting to reduce your ad costs
from US$60 to US$3 CPM, a 95 percent savings. (And yes, those cost quotes are based on real
client experience.) Online targeting of individuals has been around for more
than a decade, notes John Ardis, vice-president for corporate strategy at
ValueClick, another firm that specializes in online advertising. But interest has surged
during the recession.
"Obviously today's economy has advertisers looking to do more and more efficient things," he says. Not only are costs lower; results are often better. ValueClick, which provides retargeting, says click-through rates on such ads are 110 percent to 840 percent higher than average because they reach an audience more likely to be interested in a product or service.
Google is using its US$3.2 billion acquisition of DoubleClick to get into the behavioral targeting game, using the data it monitors from millions of Web users to place more relevant ads. The size of the prize is significant; today Google has less than a 2 percent share of the US$8 billion U.S. market for online display advertising, compared with its 63 percent share of the U.S. search market.
Quantcast is breaking some of the most interesting new ground in consumer targeting. Several services such as ComScore estimate Web audience demographics by using panels, or small, representative groups of people who agree to have their behavior tracked. Quantcast, however, makes 6 billion direct observations a day from cookies on computers that track the media habits of more than 900 million people worldwide.
Quantcast then uses mathematical models to track the paths of consumers through millions of Web sites to determine, for instance, if you are a man age 35 to 44 with more than US$100,000 in household income. The data is not individually identifiable--neither your name nor your address are collected--but the sheer size of the data set lets advertisers know exactly what type of people visit each Web site.
This approach is relatively new. Quantcast launched its directly measured data service in 2006 and has been rapidly expanding it to new publishers.
And that's the rub. If you, an advertiser, know every Web site visited by your most desirable audience, you can find many ways to reach them other than through such marquee Web sites as WSJ.com, BusinessWeek.com or that of The New York Times--especially if the cost is lower. "Why would I pay US$60 if I can pay US$4?" asks Ardis of ValueClick. "There is really going to be a backlash. Newspapers felt it. Magazines felt it. There is a reckoning coming in online channels, too."
Publishers can use data to fight back
But online publications don't have to go the way of newspapers--if they, too,
learn to use the new customer data.
"It will give them new and more innovative ways to sell the audience," says Quantcast Chief Marketing Officer Adam Gerber. Consider a site whose visitors are 80 percent male. In the past, that site may have attracted only advertisers who wish to reach men, leaving some inventory unsold. But with better data about readers, the site can now sell to a new set of advertisers the 20 percent of its space that attracts women.
Christine Peterson, president of 212, New York's Interactive Advertising Club, agrees that publishers can defend themselves. For example, they could charge an advertiser a premium if they can predict that readers are in the market for that advertiser's services. "Just because I looked at a financial page doesn't mean I'm ready to hear from Charles Schwab," she says. "But if I've been back and forth to multiple financial pages in recent days, could they charge Charles Schwab more? Yes."
The new, behavioral-targeted data could spur demand for online advertising. "We had a marketer who was launching a low-carb bread when Atkins and the South Beach diets were all the rage," Ardis notes.
"They were targeting women--but it turned out a huge portion of those who signed up were men in their 40s who were starting to develop a little paunch." The advertiser started to spend more on advertising to reach the newly discovered male audience, he says.
So hope remains for online publishers: Find unsold segments of your readers and sell them to advertisers that previously couldn't access them. Use data on past reader "click streams" from other Web sites to help advertisers reach the consumers who are most interested in their products.
Publishers, your audience data is waiting. Advertisers want it. But you'd better hurry, because the price of your old online business model is falling fast.
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A pricing revolution looms in online advertising
Online advertising is receiving a lot of bad press lately about its effectiveness.
Marketing is not what generates a sale or closes the sale. Marketing in any business is to attract a potential customer.
It is the responsibility of the business to close and complete the sale with a potential customer. With the increased useage of digital marketing which is mostly PPC Text Ads, and the simplicity of implementing text ads, everyone is using the do-it-yourself approach. The challenge here is everyone is now attempting to be an ad-copy writer.
While it may not be difficult to write a PPC Text Ad or create a nice looking banner, when the ad is displayed it is the 1st opportunity of contact. If this is not done well, the results will really show in the number of clicks. Among other factors is the 2nd point of contact when the visitor arrives to the website.
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Posted by Online Advertising Network on Saturday, April 11 2009 10:10 AM