Category: Google

Outbrain paid publishers 4x what Facebook is

Yaron GalaiLeave a comment
Image credit: Thought Catalog

Facebook announced this week that they’ll be spending $300M over the next 3 years to support journalism. Google made a similar announcement last year.

As Peter Kafka over at Recode writes, a bunch of this is actually going towards helping publishers contribute content to Facebook’s Watch product:

Facebook will keep spending money on its previously announced program to bring news videos to its Facebook Watch hub, which launched last year. Facebook is paying news outlets like Fox, ABC, and the BBC to produce programming for its site — but those payments aren’t guaranteed

Peter Kafka, Recode

As Jason Calacanis points out, Facebook is committing 0.3% of it’s annual revenue towards this:

Right on cue, Facebook does the most misguided, heavy-handed and unsustainable version of sharing the wealth, by sharing $100m a year — .3% of their yearly revenue — in a series of grants.

The cynical take is that these kinds of one-time payoffs, to highly influential media organizations, are designed to silence and tamper criticism — they’re buying off influential people for a pittance.

Jason Calacanis

Outbrain has paid out to publishers over 4x this amount (more than $1.3 Billion) over the *past* 3 years. And this is money that went directly to publishers, with no strings attached. Don’t let Facebook’s PR confuse the story – their core business is a direct competition to publishers, both in ad $$’s and users’ attention. Unlike Facebook, Outbrain has a truly enormous impact on publishers’ ability to create journalism sustainably.

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Pricing Display / Demand Creation Ads

Yaron Galai4 Comments

Following Fred Wilson’s post about display advertising, and my post about demand-creation vs. demand-fulfillment advertising, I had another thought I’ll share here regarding the pricing of “display” advertising (or in my terminology – Demand Creation Advertising)Fred Wilson says:

“…However, this study does not determine what the right price for display advertising is. Search is measurable by virtue of the cost per click and display is not. And if click thru isn’t the right measure, then display has an issue...”


And I agree with Fred 100% on that… While auction-based CPC (cost-per-click) is a great way to price the value of demand-fulfillment-ads[1], it is certainly *not* the right way to price advertising which is introducing a brand and creating demand. That’s because the users are *not* in immediate shopping mode, and the effect of the advertising on them is not necessarily embodied in an immediate click.

So following my thread, I had an idea which is slightly theoretical at this point, but could serve as a way to price Demand Creation Ads in the future:
Search ad inventory is inherently limited. That is why CPC bids on search terms are bidded up over time. In other words, the bids advertisers place reflect the balance between the value they get from each click, and the amount of clicks available on their keywords.

If this is true, then a mechanism that creates a lot more search queries and clicks should increase supply, thus reducing the cost of each keyword. One such mechanism are Demand Creation Ads (or, if you prefer – display ads). These ads don’t necessarily create any immediate clicks, but they should create more searches for the brand down the road.

Assuming all this could be aggregated and tracked efficiently (a big IF), you could then price display ads based on one metric – the increase they create in future searches.
Then the next step in pricing would be to identify a common denominator between the pricing of search ads and the pricing of display ads. So for example, as an advertiser I would know that I could pay $1 per search click, or I could pay 50c for display ads that created enough future searches to reduce my search CPC to 40c per-click.

Again – I’m not sure how doable all this is, but if it were – I think this would bring on the golden age of display/demand-creation ads on the web, making them suddenly as efficient as search ads are perceived today. 

 UPDATE: John Battelle just posted some interesting data from eMarketer on the effect of demand-creation-ads on the # of search queries —————————–>

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[1] It can be argued that CPA is a more perfect pricing model than CPC is, because it ties directly to the only real conversion metric that matters – the purchasing of a product. That is technically true, but I think that CPA has a few inherit deficiencies which make it a pretty bad solution for pricing ad inventory:

  1. It moves all the risk from the advertiser to the publisher. CPC perfectly balances the risks on both sides.
  2. CPC is a wonderful common denominator that allows all advertisers to participate in a single, easy-to-understand, marketplace. There is no comparable denominator in CPA.
  3. CPA requires a LOT of data points in order to establish the value of each ad and its probability of generating revenue. That makes it completely ineffective for a centralized and efficient marketplace.
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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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