I, along with millions of other Twitter users, received a friendly email from Twitter co-founder Biz Stone this morning sharing the popular service’s new terms of service (TOS). In the basic terms area, they add (italics mine):

The Services may include advertisements, which may be targeted to the Content or information on the Services, queries made through the Services, or other information. The types and extent of advertising by Twitter on the Services are subject to change. In consideration for Twitter granting you access to and use of the Services, you agree that Twitter and its third party providers and partners may place such advertising on the Services or in connection with the display of Content or information from the Services whether submitted by you or others.

Before you scramble to your Twitter page to see what these ads look like, they add:

We’re leaving the door open for exploration in this area but we don’t have anything to announce.

Not only are ads going to be a distinctly probable possibility, but contextual and behavioral targeting are also being hinted at, too. It’s been a few years since Google raised hackles by announcing they’d serve up contextual advertising on Gmail (the furor has died down), but behavioral targeting moves beyond simple content matching on the page/tweet and might additionally look at patterns of searching and browsing behavior over time and potentially across sites and services. Since it’s been less than a year since Oprah gave Twitter a green light, it’s safe to say that Mr Stone and the rest of the management will move cautiously, especially since Congress is currently drafting a bill that would tackle behavioral targeting’s privacy issues.

You read that right!

We’re excited to announce that we have cut our ad optimization fee to zero. If you’re a current publisher, you will see the current 3% fee reduced to 0%, and new publishers will not be assessed a fee. We have been very pleased with the performance gains that our publishers have been enjoying, and want YieldBuild’s ad revenue maximization solution to reach as many new publishers as possible. Spread the word!

Not a YieldBuild publisher? Sign up today—YieldBuild is free to try and use!

Current YieldBuild publisher? The fee drop from 3% to 0% is effective September 3, 2009. Thank you for continuing to use YieldBuild!

Analytics firm ComScore has released a study that claims over 20% of all display ads in the US are being served onto social networks, the lion’s share on heavyweights MySpace and Facebook. Interestingly, those spending on socnets have names that are surprisingly familiar: AT&T, Sprint Nextel, and Microsoft.

What about the infamous advertiser skittishness with social networks?  Sanford C. Bernstein analyst Jeff Lindsay, when asked if advertisers are sensitive about what kind of content can be juxtaposed against their ads on social network sites, said:

“They are sensitive to some extent [to suggestive or offensive content], but nowhere near to the extent you might think.”

Seems to be the case for a certain type of advertiser. The top 10 advertisers fall into buckets that make sense if your target audience is younger people (i.e. those that won’t be put off by curse words, party shots and textese): cell phone companies (AT&T, Sprint and Verizon), online degree promoters (Apollo Group, Experian) and games and quizzes (Pangea, Zynga, GameVance). And Microsoft might be trying to raise its sexiness among younger people charmed by edgier Apple and Google.

As the general population becomes as comfortable with social network content as the Millennials, we might see a broader spectrum of advertisers penetrate the medium.

For online publishers that rely on advertising revenue as a significant source of their sites’ earnings, identifying the best-performing ad networks is no easy task. Network selection and evaluation has typically been a matter of trial and error and arduous testing, but is worth the effort if it results in significantly improved revenue. Automating this testing and format optimization of each ad spot on a site is precisely the benefit that YieldBuild provides its customers.  However, the breadth of ad network choices has been limited to those networks with the scale and technology to deliver high-performance, relevant ads for a wide range of content types.

For these reasons, YieldBuild was excited to launch its Premium Text Ad Program to offer Web publishers an ad source that consistently delivers outstanding contextual relevance and high publisher value. Across sites dedicated to topics as varied as automobiles, wine and product reviews, both large and small, publishers have seen impressive improvements to their overall online ad revenue without compromising user experience nor fully cannibalizing their revenue from their other ad networks like AdSense.

Most publishers using the Premium Text Ad Program see an immediate improvement to their revenue by simply adding an additional ad spot to their page, giving YieldBuild the opportunity to serve up an additional Premium Text Ad unit alongside AdSense. Three publishers, PrimaryGames, RateMyTeachers and HubPages, have all added the YieldBuild Premium Text Ad Program to their ad network mix, and all have seen strong revenue enhancement through the addition of a superior ad source as an adjunct to other ad networks they work with.

PrimaryGames

PrimaryGames.com, an educational gaming site popular with elementary-school children, came to YieldBuild with plenty of ad experience under their belt. Having tried a wide range of ad formats and networks, they knew what worked for their site’s traffic and what didn’t, but were open to working with YieldBuild to optimize their current ads and to try out the YieldBuild Premium Text Ad Program.

“It’s clear to us that no single ad network can fill all of our ad real estate, so we turned to YieldBuild to most effectively manage our inventory and identify those networks that perform best for each open ad spot,” says Susan Beasley, creator of PrimaryGames.com. “I’ve been pleased with the YieldBuild Premium Text Ad Program’s ability to deliver high-performance text and image ads which appeal to our younger viewer base. And, importantly, the ads are high quality, important since parents and teachers are frequent users of the site, as well.”

The Premium Text Ad Program now comprises slightly more than half of the text ad revenue PrimaryGames is generating through YieldBuild.

RateMyTeachers

RateMyTeachers.com is the premier online destination for students and parents to connect and share reviews and ratings of middle and high school teachers. Online since 2000, Ratemyteachers.com boasts over 11 million ratings of over 1 million teachers. The content-rich site is a perfect match for contextual ad networks like Google AdSense, and Aaron Altscher, Managing Director, was looking for an additional high-quality contextual ad source to complement them.

“YieldBuild’s Premium Text Ad Program has been a terrific complement to other text ad networks we’re running through YieldBuild on RateMyTeachers,” says Altscher. “The Program has allowed us to serve more highly-relevant ads alongside our content and boost our revenue significantly.”

With a fill rate higher than that of any other network they are optimizing through YieldBuild, the Premium Text Ad Program now comprises almost a fifth of the revenue generated for the site.

HubPages

HubPages is a wildly popular social content network that allows anyone to create rich-media articles on a topic they know and love, and earn ongoing royalties through ads served up on what they’ve published. The site attracts more than 16 million unique monthly visitors, primarily from search engines, and enjoys almost 70 million monthly page views.  85,000 authors have published more than 430,000 articles since the site’s launch in August 2006.

HubPages’s content richness and heavy traffic from search engines has made text-based contextual advertising the ideal monetization vehicle for the site. “In a short time the YieldBuild Premium Text Ad Program has grown to comprise almost a third of our site’s total revenue.  YieldBuild’s ability to automatically allocate the best paying ads for each ad spot has been critical to the implementation,” says Paul Deeds, HubPages’s general manager. “The Premium Text Ad Program serves up highly-relevant text and display ads that complement other ad networks’ ads across our wide range of topical content. We’re also impressed with the Program’s fill rate and revenue per click (CPC), even better than AdSense’s. The YieldBuild Premium Text Ad Program’s ability to deliver great contextual ads beyond the three ad-units of running AdSense alone has really helped us increase our revenue per page.”

Optimizing Premium Text Ads alongside AdSense has allowed HubPages to continue impressive month-over-month revenue gains despite a general softening of the online advertising market. YieldBuild has placed Premium Text Ads alongside the other ads on HubPages, increasing revenue 44% over the revenue generated by all other networks HubPages works with combined.

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Particularly as an adjunct to other networks like AdSense, with which publishers have trusted relationships, YieldBuild’s Premium Text Ad Program delivers a reliable additional revenue stream and highly relevant ads that complement page content. The Premium Text Ad Program draws from a variety of high-quality text ad sources.

The big news out of the Google camp yesterday is they have opened the doors for ad networks to bid on AdSense inventory.  By logging into your AdSense account and going to AdSense Setup -> Ad Review Center you can see a list of ad networks that are bidding on your inventory.  From there, you control which networks have access.   In the YieldBuild account, I can see seven ad networks.

I read through all the emails I received on this announcement and will give my take.

Why would Google do this? At the end of the day this is about data and making the decision about the ad that gets served which gives them the ability to insert themselves on impressions they think are valuable on more inventory.  They must feel that this will help the existing AdSense business and that the fees they can take from the ad networks will more than make up for lost AdSense revenues, or it will drive up bid prices for AdWords advertisers.

Will other big players play with Google? I think the large independent ad networks will try it out.  In our list of ad networks in the Google Exchange, we already see Specific Media – I’m not sure if everyone sees the same ad networks.  Others (I won’t call them out) that have resisted working with exchanges in the past because they believe it severely devalues their service will remain on the sideline unless they have no choice.  I’d expect Microsoft and Yahoo to compete with Google, either by continuing to operate independently, or by joining forces.  I’d put players like Fox and AOL on the fence.  Fox and AOL are both working on their own exchanges and RTB (real time bidding) platforms, but there are limited numbers of large publishers which makes maintaining and keeping them potentially expensive for the smaller standalone exchanges.  At the heart of success for smaller exchanges is liquidity.  Google certainly has a leg up on this and it can be potentially a killer for others trying to get traction without having a huge set of suppliers and demand.

How do the economics work? One of the questions that publishers have asked is, Should I turn Specific Media off since they have access to my inventory through Google?  At this point, it’s not clear how much each ad network is paying (can’t see it in AdSense reporting), and what percent Google is keeping from the ad networks (Google has never been transparent with publishers about the bid rate and the actual payout of AdSense).  Our advice to publishers is to keep running ad networks independently for now.  The program is just starting and hasn’t been ramped up.  Then, we’ll need to run tests by turning off ad networks and gauging overall fill rate and CPMs.

What does this mean for the future of ad networks? This is an interesting question to conjecture.  We have believed that the number of ad networks will continue to grow into the many thousands.  Super large ad networks will prefer to have direct relationships with publishers, but will go to exchanges for some inventory.  Medium and small ad networks will ultimately focus on selling ads and servicing advertisers over managing publishers.  Most of the inventory they sell will come through exchanges as long as they can get the targeting options they need for their niche.  However, especially small network growth may be slowed if the minimum fees on the exchanges are too expensive.  If that’s the case, I suspect a sub-market will emerge of platform providers that aggregate small networks to get them onto the exchanges with less fees.

How does this impact publishers? Depending on the segment of publisher you are in this means different things.  At the lowest level, if you are a niche AdSense only site, this will probably help your revenue over time.  If you are a medium- or large-sized publisher without a direct sales force, it has the potential to help, but it becomes increasingly worrisome for one entity to have full control over the value of your inventory if they do become the one-stop shop.  For medium-sized and large publishers that sell their own inventory, they will want to make sure that the exchange network is blind so they don’t run into channel conflict. I also suspect that when Google is at full scale with certified ad networks that publishers will hold back inventory in the hopes at preventing the field from becoming completely tilted in Google’s favor.  Similarly to SEMs, publishers want competition.

What does it mean for Ad Network Optimizers like YieldBuild?  For YieldBuild, we view it as a good thing that Google is creating more demand for AdSense inventory.  I have personally felt that this would be the trend for a few years and that we will ultimately end up with two or three major exchanges for remnant inventory, but it’s likely to take a few more years still before this is a reality.  My hope for the industry is that it remains competitive for distribution and there will be continued demand for optimization services, and consolidated reporting with analytics that publishers value.  This may lead to a reduction of ad networks that publishers need to manage, but there will be more than one player

Google AdWords chief economist, Hal Varian, says this about the same ad appearing in different positions in search results or in an ad location.

We have used a statistical model to account for these effects and found that, on average, there is very little variation in conversion rates by position for the same ad. For example, for pages where 11 ads are shown the conversion rate varies by less than 5% across positions. In other words, an ad that had a 1.0% conversion rate in the best position, would have about a 0.95% conversion rate in the worst position, on average. Ads above the search results have a conversion rate within ±2% of right-hand side positions.

As Publishers, our job is to prime the pump of the conversion funnel by sending clicks.  A well placed block of ads may have many more clicks than an ad tucked in the right hand bottom location of a page.  It’s good data to have that the clicks on these ads are likely to convert at the same rate or better as a block of ads in a low click through area.  If this holds true, publishers should see the revenue per click hold steady as they place ads in places with better click through rates since the amount AdSense pays out is based on the auction of the ads and the quality of the traffic (how well it converts).

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:

• Semantic Match (Peer39)
• iSense (ad pepper)
• Personifi (Collective Media)
• Apricot (4AdNetworks)
• ContextIn
• myLOBster Media Corpus (CID)

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.

I was curious how our CPM per minute on a site we own and operate called HubPages compares to TV.  I created a formula to calculate our revenue per 1000 visitors and divided that by the number of minutes spent on the site per visitor.  The calculation yields about $5.15 CPM for each visitor per minute.

I was curious how this compares to TV.  There are about 16 minutes of commercials per hour on TV, and most commercials are thirty seconds long.   That means one person sees about 32 commercials per hour.  I used an estimated CPM of $10.25 for TV.  If a person watches sixty minutes of TV, that’s an effective CPM of $328 per viewer.  If you divide that by sixty minutes, that’s $5.47 CPM per minute for a viewer.

By this analysis, HubPages has a CPM per minute 6% lower than broadcast TV. The next thing you know TV is going to be clamoring for online ad budgets!  I was a bit surprised to see the CPM per minute be so close, given the rough industry numbers are 20% of media consumption by time is online, but only 10% of the ad spend is.

HubPages is largely monetized by AdSense, which leads me to believe that search must be a much higher effective CPM per minute than TV (a relatively passive medium for transmitting advertising messaging).  Certain content sites that are effective at selling brand ads must be better monetized per minute than TV.  But there must be segments that are way underperforming.  From the data we see, social networking sites have much lower than average CPMs and much higher average visitor sessions, so they are underperforming, but social networking is only 10-15% of total time spent online.  Other categories like instant messaging must be underperforming as well.

What’s your CPM for visitors per minute?