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For Executives, Entrepreneurs, and other Digerati who need to know about SaaS and Web 2.0.

It’s Late for the Advertising Game

Posted by Bob Warfield on December 3, 2007

There are a couple of fascinating posts on who clicks on banner ads in the web.  Several of the bloggers I follow picked up Apophenia’s post that seems to have started it all.  It’s all about the question of who is doing all the clicking on ads and why.  We certainly all have the experience of not clicking many (or any) ads ourselves and wondering who does.  The data being referenced by Apophenia was provided by AOL EVP of Global Advertising Dave Morgan in his blog.  A casual read of these two provides the following about who is clicking on ads:

What did we learn? A lot. We learned that most people do not click on ads, and those that do are by no means representative of Web users at large.Ninety-nine percent of Web users do not click on ads on a monthly basis. Of the 1% that do, most only click once a month. Less than two tenths of one percent click more often. That tiny percentage makes up the vast majority of banner ad clicks.

Who are these “heavy clickers”? They are predominantly female, indexing at a rate almost double the male population. They are older. They are predominantly Midwesterners, with some concentrations in Mid-Atlantic States and in New England. What kinds of content do they like to view when they are on the Web? Not surprisingly, they look at sweepstakes far more than any other kind of content. Yes, these are the same people that tend to open direct mail and love to talk to telemarketers.

He goes on to say that these predominately Midwestern females are mostly clicking on sweepstakes ads.  This has all prompted a certain amount of wonderment out in the blogosphere.  Noah Brier muses about whether Google has any incentive to improve search results.  Mathew Ingram wonders whether this odd demographic is carrying the entire web on their shoulders.

Some posts make you stop and think.  And then you go back and re-read them.  Carefully. 

After going back over the Dave Morgan post twice, I have concluded that it doesn’t really tell us what it seems to on first glance.  Here are just two key points to consider:

1)  These data are about ad clickthroughs on AOL.  They tell us nothing about ad clickthroughs on Google unless you think the two will be highly correlated.  I don’t.  The demographics of people who clickthrough AOL ads are pre-selected by the list of people who use AOL in the first place.  Suddenly these results are making more sense!

2)  Even Morgan in his article calls out Google as a separate case from what he is measuring, which are clickthroughs of banner ads when the audience is not in an active search-and-buy mode:

While focusing on clicks makes a lot of sense in search advertising, since the audience has already been highly qualified by their search term and is “hand-raising” — announcing their interest in a particular product or service or activity — it is logical to focus on a click as a very good proxy for the generation of a qualified lead. It makes sense. It works. The market loves it; Google will do more than $10 billion in revenue selling clicks this year. No further discussion needed, right? Not the case when it comes to display ads delivered on Web pages containing content or applications, where the audience is not in an active search- and-buy mode.

We have known (or at least believed) for years that some people like to click on banner ads, and many others don’t. While it’s never been the subject of a lot of research, it’s something that most of us have believed intuitively.

Are things making more sense now?  We skew a demographic by choosing to measure AOL, not the entire web.  We further are only measuring randomly inserted banner ads, not AdSense or something similar.  The result?  Poor demographics and very low clickthrough rates.  Is it any wonder that Google is running away with the online advertising market?  They have a better mousetrap:

– Do you want to target AOL (or insert any random property with highly skewed demographics including Facebook) or the whole web?

– Do you want to try to interrupt someone engaged in another task with advertising, or catch them when they are most susceptible, for example when they’re searching for what they want to buy?

Clearly these are no-brainer questions.  The next one will be a little harder.  Suppose you are an entrepreneur.  You’ve leveraged a ton of eyeballs through some mechanism.  Hey, maybe you have the ideal way to find a date for college kids (and your name starts with Zuckerberg).  Now here is the billion dollar question:

How do you get those eyeballs to take interest in your advertising to the point they act on it (by clicking through) without being offended or annoyed by whatever it is you do to get it in front of them?

It’s very late in the advertising game.  You’re going to need to come up with an extremely innovative answer to that question to have a real shot.  My guess is that it will be extremely difficult to build a big enough audience that tiny fractions of it are valuable.  There is a point of diminishing returns and Google is harvesting the cream.  Perhaps the ZDNet guys are right that there will be a duopoly in Search.  It is so valuable that someone with deep pockets might very well try, Microsoft is a reasonable candidate.

Failing that, you’ll have to look for richer veins of more concentrated advertising interest.  What would people with buying intent want to see?  I know it is terribly hard to find good reviews.  Searching for them on Google is a disaster.  You wade through so many waste-of-time recommendation systems that everyone under the sun has put up.  I prefer to start such searches in the blogosphere, but that is still not perfect.  If you could actually figure out how to vector people on to credible objective reviews quickly and easily that ought to be valuable search real estate.  I did read somewhere that the independent shopping search engines have gained share versus Google, which is rare too.  These guys are helping you to find the best price when you already know what you want to buy.  You can try to be the arbiter of style for some segment.  People look there when deciding what to buy.  Maybe that’s what Facebook hoped for in turning people to recommending products.  It’s funny, but as I read back over this paragraph I am struck that some days there is nothing new under the sun.  All of those approaches have existed for years in the print media.

All in all, I wouldn’t want to be trying to start out a new advertising driven venture these days unless I really had a firm grasp on some sort of secret sauce innovations.

Related Articles:

Alex Iskold blogs about how little Facebook really knows about us that is relevant to advertising.

While you ponder what your revolutionary new advertising model might be, consider this article from Dare Obasanjo that says most of the Social Networking isn’t revolutionary at all.  It is simply an evolution of what has gone before.  I agree.

3 Responses to “It’s Late for the Advertising Game”

  1. perfectly put Bob.

    To me, advertising hasn’t progressed much past undifferentiated noise. When you can opt in to be advertised too for specific services that will be a game changer.

    Paul

  2. zephoria said

    There’s no doubt that Morgan’s data is about AOL, but, much to my dismay, I couldn’t find any public coverage about any other service (which is why I keep begging readers to point me to some) so there isn’t a balancing of perspectives. What I know from having worked for two search companies is that who clicks on ads is very narrow. Unfortunately, I’ve never seen public data about the details of this.

    Also, it should be noted that MySpace is primarily banner ads. I know lots of folks picked up on search since I talked initially about what is known about search engine ads, but the questions that I ask at the end are all about social network sites.

  3. canadada said

    I recently queried ‘Google’ – ‘Who owns the internet?’
    Was mighty surprised by the answer. Predominately, in North America, it is Verizon and AT&T because they ‘own’ the cables/networks into your work/home… it raises a bigger question… what happens when the ‘lights go out’? As they will. Energy shortages are the penultimate ‘control’ game. When that starts happening we will soon really know who IS ‘in charge’…

    So, for those in the ‘biz, bank now on potential ‘energy supplier’ venues … For those who aren’t, recognize that this whole ‘gig’ is just a ‘blip’ on this whole new social radar scene. We are the neo-guineapigs in the grand ‘neo-experiment’ of ‘internet social networking’… HOW it will all play out depends very much on how efficiently and effectively we can genuinely ‘escape’ the media panopticons of our very own making….
    I mean, ask yourself, What is the POINT of all this self-im’potentate’ VERBIAGE?

    ‘Freedom is just another word for nothing left to lose… ‘
    Keep your eyes & ears open.
    ‘Cuz it truly is ‘…a long and winding road…’
    Cheers, c.

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