Category: Advertising

The two types of ads

Yaron GalaiLeave a comment

Fred Wilson has a great post about display advertising discussing a recent comScore white paper about the subject. Fred's bottom line:

"The basic insight from the report is that display advertising does not normally result in an immediate click. That makes sense because the ad is not being presented in a moment of purchase intent, like a search ad is. But the ad does create interest in the product or service which is realized at some later date in the form of a site visit, a search query, and possibly on online or offline purchase."

I think that the common distinction between "display ads" and "search ads" is not the right distinction… The distinction should be between:
  1. Demand Creation Ads – these are ads that notify the consumer about a brand, it's values and reasons to purchase it (whether factual or emotional). Display ads would typically fall into this category. 
  2. Demand Fullflilling Ads – these are ads that offer the consumer an effective shortcut to fullfiling a purchase that s/he has pretty much decided to execute. Search ads would typically fall into this category.   

Demand Fullfilling Ads (DFA's?) is a fairly mature business on the web. Demand is best expressed through a search box, and search ads are an extremely effective way of fullfilling that demand. As comScore noted – the immediacy of conversion on these ads is very high, however in terms of raw volume – there aren't many of these ads. 

However, for Demand Creation Ads (DCA's?) there is no such Google yet. DCA's have to be interesting, not necessarily relevant. That's because the consumer has not yet expressed their intent, and therefore 'relevancy' is no more than an educated guess. 

To date, the DCA's on the web can be categorized into 2 categories:
  1. Interruption ads – banners, etc are intended to capture an audience consuming content and interrupt them with ads. 
  2. Contextual ads – text ads that algorithmically emulate search advertising on non-search pages. 

Contextual ads may be relevant but, they certainly are not interesting. And therefore they mostly fail at being effective demand *creation* ads. They are also not effective as being demand *fullfilment* ads because they are presented to users who have not expressed their commercial intent. 

We're only scratching the surface with Demand Creation Ads. The future lies in the word "interesting", not necessarily in "relevant" and I think there are exciting opportunities to displace and significantly improve on both interruption ads and contextual ads. 
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Publishing – the only metric that matters

Yaron Galai3 Comments

Publishers (and bloggers specifically) tend to measure their business on two parameters:

  1. Page views
  2. Ad revenues

These are fine metrics, but I believe that they are derivatives of a much more fundamental metric which, if ignored, could be devastating to a publisher’s business. Lets call this metric the “Reader’s Goodwill Pot”.

Lets assume an imaginary pot into which imaginary goodwill points can be deposited, and from which imaginary goodwill points can be depleted. Sort of like a bank account for goodwill. Now, as a publisher/blogger, imagine you are running this kind of ‘goodwill account’ with your audience of readers.

Piggy_bank
When you post great content you are adding points into the pot. When you provide your reader with a great user experience you are adding points to this pot.

If you build a big enough goodwill pot, with a big enough audience, then you can dip into that pot occasionally, take some points away and put them in your pocket. That is also usually known as advertising.

As a publisher, with every pixel you put on your site (or ink on paper, or frame on screen, etc), with every piece of content you produce, with every ad you take on your site – this is the single most important metric you should obsess over. Am I putting goodwill points into my piggy bank, or am I taking some away?

Great publishers understand that the need to keep this balance is far more important than the need to track any of the other metrics – PV’s and revenues, for example – in isolation.

As we hit a recession, I suspect many more bloggers and traditional publishers are going to ignore this metric and will try squeezing the lemon as much as possible by cutting on the content and the user experience, and at the same time trying to maximize the number of ads that interrupt the readers. Publishers ignoring the ‘Reader’s Goodwill Pot’ will not survive, not because of the bad macro economy, but rather because they failed to understand the micro economy of publishing.   

{Image CC by: Nieve44/La Luz . Thanks!}

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Google, Quigo and ad transparency

Yaron GalaiLeave a comment

A couple of months ago The New York Times published a story about Quigo (disclosure: a company I co-founded). A couple of highlights:

What Quigo offers is transparency and control in what can often be an opaque business: advertisers pay Yahoo and Google for contextual ad placement on a wide variety of Web pages, but get little say over where those ads run or even a list of sites where they do appear…

…In response to further questions about Quigo, though, Google said it was prepared to make changes to its AdSense service that mimicked Quigo’s approach, an unusual step for a company accustomed to mapping the terrain in every aspect of its business.

Looks like the NYT nailed it. Today Google started following Quigo’s lead on becoming a more transparent network. More about this by John Battelle, Barry Schwartz, SEW, and Mashable.

From what I can tell, the Google implementation is more lip service than a real way for advertisers to buy placements on specific publishers. That is to be expected. AdSense would not be successful if it weren’t fundamentally a blind network. Google takes a small number of loss leader sites like Ask.com and AOL on which it makes little or no money. Those are thrown into the blind mix to keep the overall blended-average quality of traffic reasonable. But Google makes its real AdSense money on the very long tail of crappy/fraudulent/parked-domain/self-clicking/link-farm/etc websites. Those are the sites that advertisers would never ever bid for if they had the choice. Those are also the sites that Google can take whatever % of the revenue they see fit (which I estimate at 50% at least) because they never tell long tail publishers how much they pay out.

That’s where Google’s true money pot is, and if they remove their network’s opacity and truly allow advertisers to bid transparently for specific sites – all that revenue will go away.

This new report is definitely a welcome change for Google advertisers. Even lip service is a form of service, I guess… But don’t hold your breath for any genuine effort from Google on making its network truly transparent as long as it makes so much money by having advertisers bid blindly on sites they’d never want to be placed on. For true transparency your only choice is still Quigo’s AdSonar.

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