Tuesday, August 07, 2007

Falling Costs for Online Ads--Headches for AOL, Yahoo and Newspapers

Just what I thought would happen, is happening a price-war is brewing over online ads....and a lot of that has to do with the cheapness of online ads...

As reported in the NYPost, Web advertisers are spreading their online ad dollars across more sites and are paying lower rates in many cases... this is a total no-brainer. if you have more places where companies can put more ads, the premium ad places are going to be adversely affected. and, with all the talk of the importance of the long tail, the long tail may be loooking like the most desirable place to put lots of cheap ads to reach lots of specialized niches vs. spending big money on an big ad in a broad niche. If you, the ad buyer, thinks the specialized niches will target your market better, you'll go for the specialized niche--and the cheapness of the niches makes them a better bang for a company's buck...
It used to be that if an advertiser wanted to reach a lot of potential car buyers, their options were limited to buying the homepage of a portal like Yahoo! or a car review site like Edmunds. com.

Now, technology has made it easier to deliver ads to the right person at the right time across a multitude of Web sites.

Ad networks, for instance, aggregate Web publishers and allow advertisers to buy ads on hundreds of sites and target users based on location and other characteristics. There are also ad exchanges that automatically pair buyers with sellers.

Both give advertisers easy access to tons of cheap ad inventory that might otherwise have gone unsold.

"Advertisers have shown a willingness to embrace ad exchanges and ad networks offering inventory at lower rates," said Darren Chervitz, an analyst for the Jacob Internet Fund.

So, what can we expect? More and more little ads in more and more places--and most newspapers/magazines/portals/people making significantly less from their ads than they did in the past. The whole idea of supporting a site (website/blog/whatever) with ads will become even more of a ridiculous idea than it has been. Sites will be so ad-loaded that they will become even more difficult to read (not to mention load on anything but broadband.)

The Financial Times reports on the rise of online ads over newspaper ads, thus even more bad news for the newspaper industry.
Broadcast television and cable and satellite television combined will continue to take the biggest share of advertising dollars, and are forecast to reach $86bn in 2011. “The path of online advertising and newspaper advertising is a continuation of what we’ve been observing for many years, but it is finally getting to the point where the lines will cross,” said James Rutherfurd, managing director at VSS

Not just lines crossing, but, perhaps, reaching critical mass to where no outlet can afford to support itself via ads alone.

Frightening indeed...


Anonymous said...

Ever since the first dotcom era, I've been suspicious of the idea of advertising-supported sites (although that didn't stop me from briefly having a couple of jobs at such sites!). As this development indicates, it's just not supportable over the long term.

Tish Grier said...

I continue to be shocked by the number of folks developing Web 2.0 apps that want to rely on ads...not to mention the hype doled out to women bloggers on how much they can make from ads (as well as being product shills.) This is a really big space out here and the old models just don't work--and we *still* have no clue what will.

Anonymous said...

Advertising's new world order

I read somewhere recently that it's a battle between Google and Microsoft to determine who will be the next great advertising company in this country. Get serious ... who is buying this garbage?

I have been in and around the advertising business for my entire life. In fact, I am a third generation graphic arts designer ... only my specialty is digital. My grandfather started making a living in the ad industry in 1918, at the age of 19. His son followed. Both of my brothers and my sister have spent most of their life in advertising as well. My nephew is now attending one of the most prestigious advertising graduate degree programs in the world ... and is knocking them dead. Even my 16-year-old daughter has the knack.

The advertising industry demands perfection ... and vision. It tries to strike the perfect balance between super creative people, media experts, business people and account executives. While it sometimes stretches the norm and produces an ad like the infamous Apple attack on IBM, or the new GoDaddy models trying to host your web site accounts, it always plays within the rules. If it doesn't, you, the consumers, will let them know. You don't see laws being violated every single day by these agencies ... whether they relate to smoking prohibitions, pornography, blatant racial prejudice, or generally offensive materials of any sort. You make a mistake like Don Imus and "pow", you're taken off the air. Your advertisers dump you. And you certainly don't steal other people's work. Words ... images ... music. The industry has for the most part learned how to protect its own. It supports copyrights.

Social responsibility, respect for individual creative skills, and copyright protection have become a way of life in this industry. And now targeted advertising can be delivered to us on the device of our choice (mobile or static) and exactly when we might want to see, or hear, it. How exciting!

But it's not all about the bucks, folks. Advertising requires a degree of class ... sophistication ... social responsibility ... and an understanding of what is visually appealing and what is not. How many flashing, hopping, beeping, or honking pop up ads can someone watch before the device ends up in the bottom of the lake in a fit of rage, anyway?

What advertisers in their right mind are looking to recruit Michael Vick these days ... and we won't know the certainty of that case for many months to come. Even the slightest hint of cruelty, or lawlessness, can set a concerned advertiser, and its clients, into an uproar. The established rule has always been to avoid controversy at all costs. Let the journalists do their job on that front ... not the ad agencies.

The technology industry is entirely different. It thrives on controversy. Whether it's Microsoft stealing its ideas for Windows from Apple, or Apple stealing its interfaces and designs from HP, they are all roughly the same. It's always been that way. Try to get away with anything you can until the government authorities threaten to shut you down ... or, worst yet, put you behind bars. And if you accumulate enough cash money in the process, you can even fend off the government if you choose.

I know. I went to work for IBM in the mid-70's. Almost got disinherited by my "advertising" family in the process, but there I went anyway. We weren't taught creativity much at all in those days. It was more FUD than anything else. For those of you new to the industry, that's Fear, Uncertainty, and Doubt. "If you don't pay three times as much for this IBM system you are likely to lose all of your data ... and then your wife ... and eventually all of your children." IBM finally met its match in the 80's and took a dive from grace. They fell asleep at the wheel. I call it "we're #1 syndrome".

Then Microsoft took over. Predatory business practices ruled the roost. "Bundle this or we'll squash you. License us your ideas for pennies or we'll steal them anyway. Antitrust issues be damned. We are much better pitch men then you folks will ever be." Never had a company made so much money so quickly. "Hey, this controversy stuff isn't all that bad, now, is it?"

Then came the 90's. The decade started off with a strong rumor that a guy named McAfee had invented a cure for the computer virus (Michelangelo) that many thought he invented in the first place. And both the disease and cure spread like wildfire. When I saw him being interviewed by Bryant Gumbel on the Today Show I knew we were in for big trouble. The technology industry has never been the same. These software engineers are sure smart, but should they really be allowed to operate outside the law of the land? I don't think so.

By the end of the 90's, the Internet had taken hold. And every two-bit pirate want-a-be in the world was now an official publisher. You could go public by selling air, but stealing other people's property, selling polluted air, and then recruiting an audience to your party, or new community as they called it, was much more exciting. Business ethics be damned. The advertising industry was supposed to attend and sponsor the feast as well, but few quality firms participated at this early stage. Something didn't smell right. Tell me again why "eyeballs" are more important than "profits"?, a few from the old school would quietly whisper their concerns for fear of being heard and considered to be behind the times. No riches were reserved for dinosaurs in this new game.

I found it almost too sad to watch as many of our modern day business "heroes", like GE Chairman, Jack Welsh, and NBC Chairman and CEO, Bob Wright, got snookered by some of these new Internet visionaries, and convinced their advertisers to tag along. They weren't about to miss out on this new "zero gravity" wave ... whatever the heck that meant anyway.

So now the dust is finally settling and Web 2.0 has brought about a new world order. Power to the people. Controversy brings eyeballs and is sought after now, not avoided. Social networking is hot, buying goods via auctions over the Internet is in vogue, and user supplied content is virtually uncensored ... all of our norms are starting to change. And the software engineers and scientists out at Google have finally figured out how to dupe Madison Avenue, not just Wall Street, out of its money ... let alone the poor small business out there on Main Street!

Google refuses to follow the standards of objective and straightforward journalism and guess what ... journalism has started to die. Google unilaterally decides to digitize every single book they can get their hands on around the world without the copyright owners' permission ... and guess what ... the book publishing industry turns into a steep downward cycle ... if not a tail spin. Newspapers are all selling out, if not giving up. Google pays $1.65 billion for a start up company called YouTube, that, by and large, uses stolen property to attract its customers. Technology companies agree to censor content in China while the Chinese government applauds the fact that its piracy rate is now only slightly above the 80% level. Kids get thrown out of fraternities if they are found actually paying for music or movies they download online ... let alone using e-mail. These are no longer socially acceptable practices ... or hip. Obnoxious and intrusive advertising smears all of our online lives. Who produces these pop-up and banner ads anyway? The whole advertising industry has caved into the "science" of it all ... and it's supposed to strike a delicate balance between both science and art. Always has.

Hey, I'm not against progress. I love these search engines and what they can do. Used fairly, they can really enhance our lives. But I don't want to be exposed to stolen property every time I turn around. Are there really 147,645 companies out there giving away original content that is part of the "public domain" as Google claims? I don't think so. I'm aware that I, too, have potential liability even as an innocent user of this digital "stuff" I download online when the property is stolen. I just want to hear the truth. Who owns the content on your website anyway? Never had to worry about this sort of thing before. Responsible advertisers would provide me with a shield. I just like being told when I'm about to get hoodwinked. "Bend over ... we realize that there's no water in the shower, but our engineers are working on that one as well." Semantic water.

Go ahead, technology companies. Take all of the money. You might as well before another country like Brazil, Russia, India or China (the so-called emerging BRICs) starts to dominate the game.

But please don't call yourself an advertising company. You're a delivery medium. Stick to your knitting. We've had to solve enough problems over the years ... dealing with our own unique blend of greenhairs and greenbacks ... on our own!

Long live the power of the honest pitch! Wake up advertising companies ... we need you!

George P. Riddick, III

Bob G said...

Hi Tish - I echo your feelings on the online advertising front...we have no clue what will work. This we know...people still want, need and buy "stuff". Sellers still need to let us know whats for sale.

I'm visiting - linking? (love your upside down and backwards doodads url btw :) from a comment you left on at "news is a conversation" - http://www.spokesmanreview.com/blogs/conversation/archive.asp?postID=16762 re: citizen journalists and newspapers. Full disclosure - I work for the newspaper where the blog originates. I'm in marketing and distribution sometimes known as circulation. You know, the smaller portion of revenue generating activity for print - but we deliver :)

What struck me about your comment was how you point out that not all bloggers are citizen journalists - nor do they want to be. And not all citizen journalists are bloggers. Whats frightening is the number of readers (at least on my blog) who assume bloggers are the best source for journalism. Or who simply deny that there is a distinction between fact and opinion. There are too many biases to overcome for it to be black and white. My bias, of course :)

You are spot on that blogging is about the community. And also about news organizations getting out and meeting face to face. Its a simple step in the right direction.

As I read further down the comments I liked what Carla Savalli said in regards to an interview with Dan Gillmor and I insert the quote here - Gillmor says in response to the BIG "next 10-20 year" question - my bold

"I don't see an end to this implosion that is going on. If there's any hope a big part of it resides in being vastly more open and conversational. If people are going to be media literate in this new time ... in the end that literacy will be hugely to the advantage of the traditional media if they're still around because people will retreat to quality at some level. The paper industry is badly missing a bet on being the leaders on media literacy. There are good reasons financially for doing it and doing what the community need."

Thanks George - Ars longa, vita brevis est. A balance between art and science - well stated.

Tish Grier said...

Thanks, George...have you thought of blogging? I think you've got lots of thoughts that others might be interested in reading...

and Thanks Bob--funny you noticed the doo-dads url! that's something that used to make me laugh so hard I couldn't breathe (and that was *always* the aim of my friend Ed...)

I think people, to some degree, want journalists to be open and honest about their biases. It's what's behind why so many hate, and so many others love, FoxNews (me--I hate it.) Fox is also seen as more "honest" because they're pretty upfront about their hatred (although IMO, more obscure about what they actually and truthfully support. In Rupe We Trust???) Perhaps that's what's behind some of the folks you know feeling more comfortable with blogs...

Plus, there's the notion of blogger as trusted aggregator. Readers know where the blogger stands on this or that--thus the things the blogger points to will support this or that opnion.

Maybe it's that some folks don't want to think for themselves? I don't know...

As for media literacy--Andy Carvin and I once compared notes on this, and found that we were taught media literacy at home by our parents. They were the mediators, who showed us about newspapers and televison news, how to integrate the different forms of mass media, and to ask critical questions. My parents weren't university educated, either. So, it's not that we both had these brilliant sets of parents. I wonder, though, about modern families--if Gen X has been just too busy being entertained and thus not caring about the news enough to teach their children about it (I don't have children, so I don't know...) Perhaps Gen X (which I'm part of) and the Boomers are themselves too overwhelmed to teach their kids--and that we may have to rely on media to do it. But, to me, that's a bit weird.