Category: Advertising

Seth Godin (a WebX.0 favorite!) responds to the NY Times piece on Quigo today with all fair points:

If you’re running a pay per click ad designed to support a cost-per-acquisition strategy, (Google AdWords, et.al.) then does it matter where your ad runs?

Remember, the point of the ad is to get someone to click (that’s what you’re charged for…  the click) and then the goal of the site is to convert that click into permission and eventually a customer.

So, does it matter where the ad runs if it works?

From the marketer’s perspective, I agree 100% with Seth on this point – if (and that’s a huge IF… [1]) the campaign works, and the ROI is good, it’s insignificant where the traffic came from. But while advertisers may not care where they get their clicks from
them, they certainly do adjust their bids to account for the mix of
high-quality clicks and spam/fraud/foreign/etc clicks.

What happens in essence, is that the premium publishers in this mix are
getting lower bids than they should have, while the low quality traffic
sites get higher bids than they would have had they sold to advertisers directly [2].

Now, while Quigo caters to both marketers and publishers, we view our platform primarily as a publisher solution. We offer it as a private label to publishers, and let them acquire and manage their advertisers through it. It’s the publishers who we see benefiting most from the AdSonar solution, with marketers benefiting as a result of our insistence on catering only to the highest quality publishers in the country.

The TV network example is not applicable to our space… Unlike any advertising medium in the past, we don’t (nor do our publishers) determine the pricing of the media sold. That is determined by the marketers, and therefore it generally reflects the value the marketers get from the media they’re bidding for. The fact of the matter is, that marketers are willing to bid higher for a site with quality, US-based, non-fraudulent, non-spam, non-accidental-traffic traffic than they are willing to bid for that same site combined with 100,000 other lesser quality sites.

And that, publishers really care about.

 

[1] The Big Co‘s mix into their traffic a bunch of awful sources (misspelled domain names, spam blogs, etc, etc). They can get away with this to some extent because the junk traffic is mixed and diluted with the quality traffic on their network and search destinations…

[2] Google’s SmartPricing does mitigate this issue a little, but it certainly does not come close to solving this issue. When junk sites are part of the mix, and they’re getting paid something, someone is bearing that cost and that’s the marketers…

According to TechCrunch, some executives at Fox are unpleasantly surprised by Google’s acquisition of YouTube:

A source inside of Fox, which owns MySpace, tells us that they were surprised that Google was aggressively pursuing a deal with YouTube, given Google’s nearly $1 billion advertising relationship with MySpace. MySpace views YouTube as a competitor, and recent Hitwise data shows Myspace Video quickly catching up to YouTube.

The only surprise is that Fox is surprised by this.

Last month when the MySpace-Google deal was announced, I wrote this:

MySpace is essentially outsourcing its kitchen
over to Google and becoming another node in its network. When that
happens, MySpace will actually deliver *less* traffic to retailers,
while feeding the Google beast and giving it an even bigger share of
web traffic. Retailers looking at their log files will see the traffic
coming from "Google AdSense", not from MySpace.

In this relationship, Google is the only one that walks away with
the long term assets of advertiser base and deep expertise in
monetizing traffic.

Google makes ~5x more money (bottom line) on each ad impression on a Google-owned page than it does on a 3rd party AdSense page. If the company wants to continue growing the way it has so far, they won’t be doing it via deals like MySpace on which their margin is negotiated down to barely nothing. They will do this by building and acquiring their own media, which is 5x more valuable to them.

Deals like the MySpace-Google deal are pretty much a trojan horse for Google to build its direct advertiser relationships and monetization expertise on the shoulders of others. The real money will be made on the content that Google owns/will own. It’s a loss-leader game.

Every time Google signs a mega-deal for powering a 3rd party media company, its almost guaranteed that they will shortly after get into that business themselves and become the biggest competitor around (with all the ad relationships). If they don’t balance Google-owned media with 3rd-party ad syndication, they risk significantly diluting their overall profit margins because of that 5x factor. And that doesn’t seem like something they’re intent on doing.

IMHO – The best use of the Google money going into MySpace, AOL, Ask.com, etc is to build or acquire their own in-house ad capabilities and eventually phase out Google. Otherwise they are bound to lose the battle both on the ad front, as well as the content front.

I wrote a couple of related posts on this here and here, and probably a few other places I can’t remember.

Full disclosure + a small plug: I am co-founder of Quigo. We offer media companies a solution comparable to AdSense, except that it is a private label. And we don’t compete with our publishers on media. So feel free to consider all of the above to be ‘interest driven objective commentary’… 😉