Category: cpl

Why (and how) the online ad model needs to change

Somehow I keep expecting some company to break through and solve the problems with the Google AdSense model. As advertisers, buyers and media vehicles get smarter about efficiency, the holes in the system get bigger and bigger.

AdSense revenues help a lot of mid to large-sized web sites, but really more as incremental revenue. By the time you’re big enough for AdSense to support your business there are several other revenue opportunities with larger payouts avaiable to you.

And there’s no doubt that AdSense (and most Internet advertising) is failing to help people find and buy the things that matter to them. How can it be that we have an ad model that is considered wildly successful when a campaign or ad unit gets a click-through rate of 1%? And the reality is that it’s much much worse than that on average.


Photo: DWS

Why are click through rates so low? Because the ads don’t matter to people. They aren’t relevant. They don’t help people identify products or brands that matter to them. They don’t help people locate the right deal at the right time.

Yes, some people get lucky if they’re paying attention. There wouldn’t have been $5B in search ad revenue in the market in 2005 if nobody was clicking on the ads. But the click performance and subsequent conversion rates suggest this kind of ad network is just a spray hose of wasteful bits showering the Internet with clutter.

It doesn’t work for advertisers, either. Advertisers want more control over their ads, where they appear and to whom they are shown. Blanketing text links blindly across the Internet does not necessarily result in paying customers. They know they’re wasting money, but they can’t afford not to be present in the network.

The AdSense model does much more to help Google and the Google shareholders than it does to help any of the customers it is supposed to serve.

I think the Amazon affiliate program is much closer to a more sustainable ad model for the future. When you can track clicks all the way to a sale then everybody wins. The weakest link in the Amazon affiliate chain is the media vehicle which has to work a lot harder to drive clicks that convert to sale. But the buyer and the seller are both happy, and that’s ultimately what matters most.

I’d love to see an ad network that is able to let media vehicles optimize the ad content and display rules for the ads. The look and feel of an ad is not going to crank up the conversion rates. Media vehicles need to help the right ad get to the right person.

For example, when I post on my blog, I should be able to flag a stream of ad content and define the type of algorhythm that makes the most sense for that post and the users who are most likely to read it. This post should probably link to lead generation service providers even though I haven’t explicitly used the term “lead generation” anywhere in the post…uh, well, you get the idea.

Likewise, users should be able to self-identify as buyers. I haven’t yet setup a wifi network in my home, so I’d love for every tech-related web site I visit to show me the latest deals and setup guides and retailers for wifi gear. I’d actually like the content on all those sites to adjust, as well. I want to see what’s new and interesting at these sites, but they should be able to surface content from deep in their archives that is relevant to the things I’m actively pursuing. My intent should edit the home page for me.

I guess I’m saying that somebody needs to build a service that on one side connects directly into an advertiser’s sales conversion or transaction systems and on the other side distributes marketing links and images for media vehicles to take and optimize. The system should track performance across the chain and offer optimization options at all points along that chain.

Pieces of this exist and some of it is very complicated, I know, but I don’t see why efficiencies can’t be improved. And if enough advertisers are able to offer affiliate programs to track impression-to-click-to-sale, then they may even start competing with eachother and offer better incentives to media vehicles that find customers for them.

Users would see ads for things they want to buy. Advertisers would sell more product. And media vehicles would earn more from the revenue share.  Where’s the down-side?

Reach vs target marketing: how to reduce the waste

There are 2 somewhat opposing forces that advertisers are always trying to reconcile:

  1. broader reach
  2. higher precision

Search marketing solves the former. And niche publishing solves the latter. It seems to me that there are ways everyone could benefit from combining those systems in some way.

What B2B trade publishing discovered is that more valuable customers can actually be found and identified with the right kind of carrot. The methodology is very simple. If the value of the content on offer is higher than the cost of obtaining it, then people will give the publisher marketable data about themselves.

Globalization and Innovation by John Hagel and John Seely BrownIt hit me after giving my email and then downloading John Hagel’s and John Seely Brown’s PDF’s that I should be able to setup something like this through a simple self-serve tool if I wanted the same functionality on my site. There are a couple of longer papers I’ve been considering writing, and I’ve started playing with screencasts that might be particularly valuable to certain people.

If my paper or screencast had specific advertiser appeal, I should be able to triage the lead collection and bidding for temporary access to those people who agreed to be contacted in exchange for the content.

There are some smaller players who focus on certain kinds of lead generation activities. Some focus on webcasts such as Accela and On24, others on PDF’s such as ITBusinessEdge and IT.com.

Online tech publisher TechTarget purchased BitPipe in late 2004 for $40M, a successful whitepaper-based lead gen provider, so they could own the whole service chain from promotion to lead collection. This is very smart as they collect ad revenue all the way along the marketers path.

The next step after that, of course, is to connect directly into the sales channel at the advertiser’s side. That way you could watch the whole chain. You could see which promotions converted to leads and then translated into sales.

KnowledgeStorm shares this vision and has made some progress toward that end. They offer a lead generation system in tech B2B publishing which includes several methods for following up with the leads they pass to marketers. For example, they actually phone the lead and ask whether or not they purchased anything. (It turns out that in many cases the marketer doesn’t even contact the lead.)

There’s a lot of work going into algorhythmic improvements to ad targeting and behavioral approaches to identifying the right customer for a particular advertiser. These are certainly important, but there’s a much larger opportunity, in my opinion, in a distributed lead capture system. As always, the first to market in that kind of ecosystem will be difficult to unseat.

Regardless of who gets there first, that kind of efficiency would potentially create a win-win-win across the board. The marketer could spend less to get more, better customers. The publisher would improve yields on their already limited inventory. And people would get more relevant promotions for the things that interest them…well, we can dream, at least.