This week, AdSense announced some improvements to their ability to match ads to content will be rolling out. As they say, the proof is in the pudding. Since Monday, we’ve seen a 15% increase in CPMs that has been consistent across a sampling of our publishers.
While it’s not uncommon for AdSense earnings to fluctuate, we hope that the correlation between this announcement and improved earnings is here to stay.
Last week, at SES San Jose (a popular convention for the SEO crowd), I participated on a panel called, “Don’t Call It a Comeback: Semantic Technology and Search.” Three of us gave presentations: Nova Spivack from Twine, Lane Soelberg representing Wolfram Alpha, and I spoke about some tests in semantic SEO that we ran on HubPages. Rounding out the panel were Othar Hansson from Google, Hope Hackett from Ask, Kevin Haas from Yahoo, and Mark Johnson from Bing, who also wrote a terrific recap of the panel on his blog. Dana Todd from Newsforce and SEMPO was the moderator.
Most of the discussion revolved around the impact of semantic knowledge aggregation would have on search engine results and the balance of search traffic. During Q&A at the end, though, Dana asked about the impact of semantic technology on advertising.
I offered my opinion that semantic ad targeting has been and will continue to evolve as a refinement of contextual advertising. Semantic technology’s strength is identifying what something really means, what the real meaning behind symbols and words. For example, a simple contextual match on a page about how to clear your browser cookies might serve up ads for Mrs Field’s. Semantic technology would notice the preponderance of tangentially-related terms on the page, such as browser, Web, program and the like, and probably result in an ad for Google Chrome instead.
Semantic technology should also sense the mood of a page, and know, for example, if serving up ads for Microsoft is appropriate on a site that could be potentially bashing them (not a good idea when most savvy Web users know contextual ads are often priced by click!).
Beyond text, the big opportunity is with display ads that, without proper and extensive tagging, usually are clumsy or impossible to contextually target. Making sense of metadata, tags and even copy and design elements within the creative grants ad networks the ability to make the most of their display inventory.
What technologies exist in this space? I already wrote about Peer39 and adpepper’s iSense last year. Here are a few companies that have developed semantic matching technologies in the online advertising space:
The field is being rapidly littered with failures, like Clikkit’s SemSense, Aduna, and Dapper’s MashupAds, so the technology is still in development and its full potential not yet achieved.
UPDATE: We are glad to hear that Dapper’s MashupAds is alive and kicking … and has been renamed to Dapper Ads.
Rob Norman has a take on where advertisers should be reinvesting their recession dividend.
In the delivery business brand owners have received a recession dividend in reduced costs per thousand. The smartest ones will re-invest the delivery dividend in the assets and processes required to win in discovery.
For many companies, what seems like a cost savings in CPMs, it often chewed up in lower margins and reduced sales. At the same time, ad rates have adjusted to performance levels that have a greater ROI in categories where supply continues to grow or where there has been attrition in advertisers. This opportunity may be small on a market by market basis, but is significant as long as more inventory can be identified.
Developing a discovery strategy is the real heart of the emerging marketing practices of search and social media. It involves asset creation, optimization and distribution and is, in a general sense, a far more atomized approach than advertising with a far higher failure rate.
I think the assertion of search and social media as the foundation to discovery is key and true, but the issues of scale and efficiency remains. Identifying fragments of well performing inventory can certainly be largely automated and will deliver a disproportionate amount of value impression by impression, but at what cost. From what we have seen, the efficiency play of buying lots of impressions at a lower cost and running them like a shotgun blast picks off the valuable segment at a lower total cost of reach.
For advertisers to invest in more efficient buys through better identification of inventory and creative the results of the optimization function must change. The cost of the mass buy must be less efficient than the targeted buy. If advertisers see this coming. Now is a good time to invest in the processes and technology, but if supply continues to outstip demand, I suspect we will continue to see depressed CPMs. Until then, we hope the recession dividend will be reinvested in larger buys than removed from the market in its entirety.
Advertisers picking placements in traditional media, such as magazines and television, often have a lot of control over where their ads are placed. They typically have access to the editorial calendar or a synopsis of the episode to be aired, and also often know who (some of) the other advertisers are.
In contrast, advertising online usually affords advertisers relatively little control and transparency into the environment their ads are being placed in. Although they can often cherry-pick the sites where their ads appear, they can’t usually pick what content is running adjacent to their ads. Transaction-oriented advertisers might not really care, but this is the sort of thing that drives big brand advertisers and agencies nuts.
Social media ad network BuzzLogic has launched what it calls its “Conversational Advertising Dashboard” to allay exactly these types of anxieties. Information about the type and tone of the ad-adjacent content, the scope and nature of the conversations, author credibility, content freshness and ad performance by conversation are provided, across the 3,000+ “influential” blogs in its publisher base. Along with insight comes control: advertisers can yank placements if they don’t like what they see.
BuzzLogic’s dashboard is an addition to its Conversational Advertising platform, which it launched last year. The network reaches 33.3 million unique monthly visitors and serves approximately 2 billion impressions in concert with networks such as AdSense, BlogAds and Adify.
Ren and I are attending WordCamp in San Francisco, the Automattic-sponsored one-day event dedicated to WordPress, the popular blogging platform (and the one we use here at YieldBuild). This is the fourth anniversary of the SF-based WordCamp—the event has spread to more than a couple dozen around the world in 2009.
Forgive the choppy style – I’m semi-liveblogging. It’s also a bit geekier than your usual YieldBuild blog post, but hey, this is a blog platform conference.
Highlights so far:
I’ve got to say, by the way, that the WordCamp organizers are really spoiling us with the grub and swag. Omnivores enjoyed barbecue, while we veggies got grilled veggies, collards and mashed potatoes and cornbread. Got great swag, including a blue WordCamp American Apparel t-shirt, buttons, pens and decals galore, and a temporary tattoo. Keep in mind the conference registration cost $20!
Q&A with Matt:
My favorite iPhone app, surprisingly, is the New York Times app.
I know, I know.
It’s kinda boring and marks me as a fuddy-duddy.
Which I am.
But it is a great little app. It’s well organized, fast and very usable. And it has some of the better iPhone app ads that I have seen.
These little ads slip up from the bottom of the article viewer and tend to be on the cleaner, less obnoxious side—low use of images, heavy on the branding, and unobnoxious colors. IMHO, they do it right. When you click on an ad, it keeps you in the app—it simply takes you to another page still contained within the app and its controls, so you can go back to what you were just reading. What would be bad is if clicking on an ad opened a webpage; this would close the app down and launch a browser window.
As some of the more creative ad network players out there like AdMob and VideoEgg dabble with various models such as Cost Per Engagement (CPE) and begin to evolve their offerings, it makes me wonder how much the success of advertising on the iPhone depends on the evolution of the system and not just the networks. The evolution of the iPhone and its app platform will certainly impact the effectiveness of these ads. Click metrics and performance measurement capabilities of iPhone ads are certainly two vectors that will change as the system and platforms evolve, but also what an ad and its creatives can do and can be will change.
A new app SDK is coming out in a few weeks rumored to offer microtransaction capabilities in it, and the new iPhone and software release are due out sometime this summer, rumored to support background processing for apps. This will change what the user can do with ads and likely bring the user app experience to a whole new level. If a browser can be launched without shutting down the app (and, even better, if it can “pause” the app) that’s a whole new set of advertising opportunities. If an ad can offer something that you want to buy right there, tempting you to burn a few of your digital dollars on an MP3 or video, or whatever—and if it can do so through a seamless microtransaction payment to your cell phone bill—that’s frictionless, fast and awesome. Now my head is swirling with ideas like a QVC app, or an auction app that connects with in-app advertising, but alas, that’s crazy talk at this point.
Now if I could only get my iPhone to not drop calls, and deliver me voicemails within 6 hours of when people leave them, I would be a happy boy.
In today’s performance-focused ad market, CPC, CPE and CPA pricing models have dominated as marketers have striven to justify ad spend in a down economy. Display’s value in promoting brand awareness and presence has been something advertisers have invested relatively little lately; better to focus spend on consumers further in the sales cycle, instead of casting such a wide net.
However, recent research released by iProspect suggests that advertisers shouldn’t dismiss the value of those visitors who view a display ad but don’t click: many of them will still be impacted enough to actively search for more information on their own.
For those respondents who said they had seen display ads over the past 6 months:
I have to admit personally that I fall into the third category. Often because I don’t want to disrupt my browsing experience, or because I want to know about the company before looking at a specific promotion, I’ve made a mental note about an intriguing product or ad and searched later. I’m currently in the market for a new car, but don’t want to see a flashy splash page for a car I hadn’t thought about—but I do want to learn more about it.
If advertisers can believe that CTR doesn’t capture the full value of a specific online display campaign, how can they measure its impact? Considerably difficult, but such is the case when advertising to early prospects no matter what the medium. Brand awareness studies are probably the best indicator of a campaign’s effectiveness at lining up future potential customers.
Advertisers might also be interested to know that display advertising working in concert with performance-based ads tend to boost the effectiveness of the latter. A few days after I saw an ad for the VW Rabbit, I filled out a lead form on Autobytel to get a quote from a dealer; I never clicked on the ad.
San Francisco startup SocialMedia has launched three new social media ad formats that portend what is likely to come, provided users are comfortable with the amount of personal information the ads share.
It’s not hard to imagine that the ads will perform well. Seeing a friend’s picture or name and implied endorsement of something has been the key to Facebook’s apps’ virality. Given social media users’ aversion to anything other than something bearing a friend’s face, and the explosive popularity of Twitter (thanks, Ms Winfrey), the new ad formats exploit novelty and social graph data to drive attention and engagement.
But are all visitors going to be enthralled? Some are likely to quickly draw some conclusions that they hadn’t anticipated: what I write on Facebook and Twitter isn’t limited to my friends and followers. The next question will probably be: who else has access to this data and what are they doing with it? And the next thought could be: how do I change my settings? or I’m never using Facebook/Twitter again or How do I contact my Congressman?
Maybe an exaggeration, but we all remember the uproar of Facebook Beacon, and in that case, we knew who had access to the data (Facebook only), and the data was shared within the private confines of one’s social graph on Facebook. My suspicion is that many don’t know that the Twitter firehose is publicly available, and that Facebook shares activity data with advertising partners. We’ll see how discomfiting users find this, and whether this is just another form of targeting that raises the ire of Washington.
Sanford C. Bernstein analyst Jeffery Lindsay has increased his price target 30% for GOOG to $600, on the back of increasing RPCs (revenue per click) that it expects to dovetail with the recovering economy. He estimates Google’s growth to reach 7% for 2009, almost double that of Reuters Estimates’ aggregate analyst prediction of 4%.
Lindsay, in a note to his clients, expects advertiser competition–reflected in RPC–to remain weak through the second and third quarters, but he expects a healthy rebound that will boost Google’s YOY revenue growth to 14% in the final quarter. His estimation completely depends on the recovery of the economy and advertisers’ zest for online advertising to grow their businesses.
Google’s ability to develop inventory has sustained through the downturn–click volume grew 17% YOY in Q1 2009. The weakness has been in RPC, which has taken the steam out of Google’s search revenues.
The market, maybe a bit hungry for some good news from The Google, increased $5.89 in afterhours trading from a Thursday night close of $396.61 to a Friday morning opening price of $402.50. At the publication of this post, GOOG is trading at $407.98 (a 20 minute delay, naturally).
Guest post by Ryan Floyd
Ever since its debut, online’s share of advertising has lagged behind its share of usage. The impressive ROI of search and contextual advertising by Google and its competitors raised expectations even higher, with many saying it was just a matter of time before online advertising earned its share of total advertising spend. Strong double-digit growth online advertising rates through most of the mid-2000s, while traditional media advertising foundered, seemed to corroborate the conventional web wisdom. But can web advertising really continue to capture, dollar for dollar, the spend traditionally spent on television? I’m not so sure.
Even while the online advertising world weathers the current downturn, expectations for a rebound are common. Why? Usage patterns continue to shift, with more time being spent online (particularly watching video and on social networking sites). Online advertising consumes only 8% of total US ad spend, but Web usage comprises some 30% of leisure time among American Internet users (more than half of the entire population). The gap must be filled, right? And what better than an advertising medium that provides exceptional visibility into its value, in the form of impressions, clicks and conversions.
The problem is that the performance basis of evaluating the effectiveness of online advertising is really only the case for search/contextual, and indeed that continues to grow at a healthy clip. Lead generation and transaction-oriented advertising has proved remarkably efficient and cost-effective in many cases. Display advertising’s value relies on the promise of expanding brand awareness and engagement, and current display and rich-media advertising fails to deliver the same impact as a 30-second spot in front of a passive, captive audience. If you remove high quality online video, like Hulu, from the discussion, since it is simply replicating television’s advertising model through a different distribution medium, it gets harder to believe that engagement across social networking platforms or content sites has the potential to create the same market size as compared to dollars spent in traditional media with similar objectives.
It should come as no surprise that the IAB is championing more inspirational, creative online ads, and that startups like VideoEgg are introducing CPE (cost per engagement) and other revenue models that emphasize the depth of users’ interaction with online advertising. When it comes to delivering on its own objectives, the finest online ad creatives have to do a lot to catch up to your average Super Bowl TV ad.
It’s not difficult to imagine that the spend-usage gap will continue to close, but it is easier to imagine that ROI-driven search and contextual advertising will take a larger portion of that growth. Display and rich media will likely fare much worse, growing in dollar terms but far less than the 1:1 spend we’d expect to be flowing to the likes of Facebook and Google publishers from traditional media.
Ryan Floyd is a founding member of Storm Ventures, and sits on the board of directors at YieldBuild.
