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Archive for May 20th, 2008

Online Search Ads Faring Better Than Expensive Displays

Posted by Mort Greenberg on May 20, 2008

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May 19, 2008


In the past few years, Web publishers have made a big bet on booming online advertising revenues. But the economic slowdown may be throwing a wrench into those plans.

While search advertising remains strong, there are signs that the growth in online advertising — particularly in more elaborate display ads — is slowing down. In the past few weeks, major online-advertising players, like Yahoo and Time Warner, have posted mixed results.

And online publishers may be getting less money for the ad space they do sell. The prices paid for online ads bought through ad networks dropped 23 percent from March to April, according to PubMatic, an advertising-technology company in Palo Alto, Calif., that runs an online-pricing index. Large Web publishers fared the worst in PubMatic’s study, with the prices they received through networks dropping 52 percent.

These are only preliminary results, and the economy could turn around more quickly than anyone expected even a month ago. But, these numbers must be worrisome for Web portals, newspaper publishers and news media companies like CBS (which announced a $1.8 billion deal last week to buy CNet Networks) looking to expand their revenues from high-priced display advertising, like graphics-heavy banners and column ads.

“The weakest form, the one that’s most susceptible to a downturn — and this is what we’re seeing — is display advertising,” said Jeffrey Lindsay, senior analyst at Sanford C. Bernstein & Company.

Display advertising at the network AOL declined 18 percent, to $191 million. AOL is owned by Time Warner, which reported results last month.

“We were not satisfied with the performance of display advertising on our owned and operated inventory, which declined compared to last year’s first quarter,” said Jeffrey L. Bewkes, the chief executive of Time Warner. (Mr. Bewkes blamed AOL itself, not the economy, for the company’s poor performance.)

The growth in online advertising is also slowing at The New York Times Company. In the most recent quarter, Internet ad revenues increased 16 percent. A year earlier, though, they were increasing at 20 percent.

In late April, WebMD Health reissued its earnings guidance for the year, revising revenue to a range of $380 million to $395 million, from a range of $395 million to $415 million. The change reflected “a recent shift toward shorter-term buying commitments in certain of its customers’ consumer advertising purchases, which the company believes is driven by increased caution in the current business climate,” WebMD Health said in a statement.

At, a similar wariness has arisen. New advertisers are looking to test their ads before committing.

“The new advertisers are more cautious about requiring some sort of proof or evidence that something is working,” said Paul Iaffaldano, executive vice president and general manager of the Weather Channel Media Solutions. Existing clients, he said, are continuing to spend, just not at the same pace.

One area that remains strong is search ads. They are considered cheap and effective among marketers — even in a potential recession — and they are how Google makes the majority of its money. In the most recent quarter, Google had a profit of $1.31 billion on revenues of $5.19 billion. Its United States revenue was up 30 percent from last year.

Google’s chief executive, Eric Schmidt, dismissed talk of concerns that the company would be affected by the slowdown. “It’s clear to us that we’re well positioned for 2008 and beyond, regardless of the business environment that we find ourselves surrounded by,” he said on a call with investors.

Yahoo, which last year revised its guidance because of a weakening display market, had a first quarter that beat the average analyst expectations, with revenues rising 9 percent, to $1.82 billion. Yahoo did not specify how much of that was fueled by search, which makes up a chunk of Yahoo’s revenues, and how much was display.

Microsoft’s advertising revenue, excluding its acquisition of aQuantive, an online-advertising company that Microsoft bought for $6 billion a year ago, grew by 29 percent, up from 23 percent in the quarter a year earlier. However, overall profit dropped by 11 percent, to $4.39 billion.

Mr. Lindsay, of Sanford C. Bernstein, said that recession fears might actually help some media companies, as marketers move their budgets online.

“In a moderate or even quite severe downturn, online advertising actually improves, because people switch their advertising budgets out of traditional advertising formats — TV, radio and print — and move more online because it’s got higher performance, it’s cheaper and it’s more measurable,” he said.

He also cautioned that such a boost would only go so far. “If the downturn is so severe that advertisers stop advertising altogether, or face financial difficulties, then online is affected like everybody else,” he added.

Some of the ad dollars that in the past had been spent at portals are being spread around instead. Ad networks, which fan out ads to thousands of sites, are adding targeting and are signing up reputable sites, making them more attractive for advertisers.

“There was a time when we would go out and buy inventory on the portals,” said Quentin George, global head of digital media and strategic innovation at Universal McCann, which plans media for clients like L’Oreal and Sony. “Portals make it easier for us to buy and place media on behalf of our clients. But as time continues and as analytics capabilities increase, you find that your media dollars can work better elsewhere across a range of different sites.”

Michael Hayes, senior vice president and managing director for Initiative Interactive, which handles digital spending for clients like Home Depot and Bayer, said that advertisers might be turning away from broad buys and looking for more targeted campaigns on smaller sites.

“This is hurting the portals,” he said. “There are more options.”

A bright spot for these publishers is, if the economy remains sluggish, they may convince marketers that have never spent money online that this tough economy is their chance.

Cheryl Barre is one of those marketers. She arrived 18 months ago at the Arby’s Restaurant Group as chief marketing officer, but did not introduce her first ad campaign until April of this year. By the time the campaign was supposed to begin on April 27, though, worry about a recession was mounting.

So Ms. Barre put together commercials offering deals on food. But she kept Arby’s online piece of the campaign, marketing the company for the first time through a Yahoo homepage takeover and a Facebook page.

“I’d hate to say we’re late to the party, but we’re getting our act together. For the first time, this year we allocated some significant resources to online media,” Ms. Barre said. “We haven’t scaled back at all.”

General Motors is continuing its big move of money from traditional advertising to online. “We have been shifting more and more resources to digital and will continue to do so,” said Betsy Lazar, executive director for advertising and media operations at General Motors. The company seems to be hurting from the economy — it reported a quarterly loss of $3.3 billion in April.

A recession, she said, does affect a digital spend, but not by forcing a pullback.

“If you think about the fact that industry sales are down this year, year to date, and when you think about fewer people being in- market,” she said, “digital is even more important to be able to talk to those consumers who are in market.”

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The X Factor: Why banners fail

Posted by Mort Greenberg on May 20, 2008

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Published: May 20 2008

If the media biz is a jungle, banner ads are cowardly and camouflaged. Try a plan of attack that goes in for the kill.

I just ran into a series of roadblocks on The New York Times, and The Washington Post, and I was thinking: Are they just bad banners times two, or is there something more to this format that offers value to advertisers?

Well, I know the answer because I have run multiple campaigns for multiple brands over the years, but I’ll make you wait for that. First, let’s define what they are, and what they are not. I’m tired of hearing people use terms loosely in our industry. Precision is necessary for understanding. Without it, we’d all be monkeys poking each other with sticks. Actually, when it comes to understanding internet advertising, many people still are. Well, maybe they’re not even that good. How about “flesh pods with arms.” That’s a little more accurate. Alas, but I digress.

If you come to a site, and before you enter the site, you have to sit through an ad, that is an introstitial. If you are on the site and have to sit through an ad when going to a different section, that is an interstitial. But, if you are on a page and all the ads on the page are from the same advertiser, that is a roadblock. I often hear people in the industry group these three together and it only creates confusion for those flesh pods with arms.

So, why would an advertiser use a roadblock? First, the problem with banners. You may know my views on the banner format from my previous rantings, but is the roadblock any better? Or are you just flushing double your money down the drain? Well, it all depends on your business model and your objectives. Wow, that’s a cop-out and a bit MOTO (master of the obvious). I’ll explain whether they are useful, to what businesses, and how — after a bit of an explanation of the overall failings of the banner.

One of the greatest failings of the banner format is that it is peripheral to the content and not interruptive. We all evolved as predators, regardless of what the leaf-chewing members of our populace think. Why is that relevant? Well, evolutionary biologists will tell you that predators evolved with peripheral vision that picks up movement better than what’s right in front of you. And, it picks up ticks in movement and changes in speed better than smooth, clean movement.

Where are banners located? Ah, now you’re starting to get it — Have. The. Banner…….[pause] React. [pause] [pause] [pause] Move. [pounce] Like it’s stalking prey. The consumer’s eye will instinctively glance to see what it is. Don’t be impressed with your smooth, animated banner approved in isolation of the consumer. It looks nicer but will not achieve your main objective: the attention of the consumer.

What a roadblock does is focus that attention. There are many sites like The New York Times and The Washington Post that offer compelling roadblock experiences. On the Times, you can buy two-hour blocks of roadblocks. On rich content sites, it’s even more important to capitalize on peripheral focus due to the engagement of the user to the content, in the center of the page.

It’s a very effective strategy depending on your business model. Ok, there is the cop-out again. Let me explain a simple way to approach it. If you’re a click-based business doing direct response to drive people into a funneled sales experience, then often a roadblock will not provide the delta increase in your clickthrough rate necessary to justify the additional cost.

However, if you supplement that advertising with single banners on the site and look at the combined effectiveness, you will often find that you get a significant increase in overall response rate. If you are a business that believes that view-through has value, you can prove that a roadblock is a far superior format for your business to a single banner for accomplishing your goals. An impression, remember, does not mean that the consumer ever saw the ad, it just means that the ad server delivered the “opportunity” to see an ad.

Roadblocks dramatically increase that opportunity beyond the additional cost required. Remember, aim for peripheral focus in your ad creation and increase the effectiveness of your campaigns. Don’t create ads that annoy us.

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