As a co-founder and CEO of Stocktwits, and angel investor in so many web deals, I spend a lot of time thinking about web advertising.
Is it worth doing it? What’s the time sink? How do I measure it? how do I sell it? Who should we sell it to? Where do I buy it?
One person Soren and I have asked to help us with all of the above and more is Jonathan Mendez who has a cool blog as well ‘Optimize and Prophesize’.
In response to my ‘Transparency Post’ yesterday he commented:
Advertising legacy was actually noted early in its formation as the famous Department store scion John Wanamaker with the famous line “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” Now we live in a world where we gaining the intelligence to know “which half” — problem is for media and agencies, once everyone knows, that half doesn’t get spent.
The rise of performance advertising on the web counters this in an interesting way as dollars are managed to volume (sales/leads) and cost per. Here waste is weeded out rather quickly. The most interesting thing going on here in regards to waste is how Google brilliantly manages it. This is really their “special sauce” and unless you are really in the depths of Search Advertising you wouldn’t ever stop to think about the effects of waste during on-boarding or the use of match types or quality scoring but it’s happening. The lesson here is that if you can make a system that can bundle in waste but still makes people happy & successful with a modicum of transparency, you’ve hit a grand slam.
Interestingly, display advertising, once hailed as the bastion for Internet brand dollars is also now being consumed by performance campaigns because of the falling prices (due to increased supply). The issues here are a bit different as transparency is hindered due to the many layers of networks and technologies that have evolved in the stack between the publisher and advertiser. That will change. Performance dollars follow the path of least resistance.
Are people scared of the real numbers? In display they should be.
Ad impressions on Search are FREE. In Display every impression costs you money. The amount of people that click ads from search on a per impression basis is 4600% higher than display. That’s a big number. When your industry is broken to the core, why would you want to shine a light on that?
Not to worry, this decade will begin the rise of new advertising channels and I believe, as you do, transparency will be a core value prop.
I just completed my opening statement.
If this topic is important to you…head on over to his blog for some good reading. That’s what I have been doing lately. Please chime in with some other great blogs on the topic of web advertising.
One of my professors in college harped on the idea of uncertainty. He said, for instance, if I’m buying a used car, the uncertainty of the car’s history will lead me to pay significantly less for that car. My risk of getting a lemon is higher.
I think Jonathan’s quote speaks to that idea pretty well in advertising. Google’s pay-per-click model is brilliant because it reduces my uncertainty as an advertiser that my ad will lead to sales. Google gives me all sorts of metrics to confirm it – view, clicks, etc.
Display advertising has much more uncertainty around it. Some display ads are just branding, meant to create a perception rather than drive a sale. But the uncertainty of changes in perception also affects the price advertisers are willing to pay.
Display advertising may be undervalued at the moment just because it is more expensive to test its effectiveness.
Congratulations, Howard, on exposing what has been a not so secret divergence for a long time. The central issue is there has two camps of marketers: performance vs brand advertisers. For the past 10 years, an overwhelming amount of budget spend has been allocated to “branding” = awareness, while ROI focused performance oriented methods such as PPC and CPA have been relegated to the digital ghetto in terms of mind share. With the economic recession mandated cut backs in branding dollars allocated to TV/Print combined with emergence of Google as arguably the largest advertising (or is it a technology?) company, performance based internet marketing can no longer be denied by brand advertisers as the most cost effective and job defensible alternative.
CEOs out there, take note – you have been getting wholesale ripped off for years. The time has come to re-evaluate the bottom line results you could have been enjoying for years as the performance baseline to move forward into the future. Your shareholders sure deserve better.
I referred to this in the comments of the previous post, but performance versus brand is essentially the same distinction Claude Hopkins made in the 1920s.
Well-said. The value of an impression is what the buyer will pay and the market will bear – it is not $0, but it is very, very (very) low.
thx…love this learnbing process happening…at least for me :)
Also need to consider inventory – during the Mad Men years there were only so many pages in Life Magazine (and only so many alternatives). These days inventory is effectively unlimited. The long-tail might work for search advertising but it’s pretty tough to make it work for display.
Thanks for the Mendez link, I’m just starting to get my head around the web advertising model.
I’ve known for a while that Google is more ABC/CBS/NBC than they are Microsoft/IBM/Apple. They produce their own shows (search, Gmail, Docs, Blogger) and buy up outside shows (some of which never get aired again). Underlying it all is advertising sales with the analytics toward conversions rather than viewership.
One of my professors in college harped on the idea of uncertainty. He said, for instance, if I'm buying a used car, the uncertainty of the car's history will lead me to pay significantly less for that car. My risk of getting a lemon is higher.
I think Jonathan's quote speaks to that idea pretty well in advertising. Google's pay-per-click model is brilliant because it reduces my uncertainty as an advertiser that my ad will lead to sales. Google gives me all sorts of metrics to confirm it – view, clicks, etc.
Display advertising has much more uncertainty around it. Some display ads are just branding, meant to create a perception rather than drive a sale. But the uncertainty of changes in perception also affects the price advertisers are willing to pay.
Display advertising may be undervalued at the moment just because it is more expensive to test its effectiveness.
Congratulations, Howard, on exposing what has been a not so secret divergence for a long time. The central issue is there has two camps of marketers: performance vs brand advertisers. For the past 10 years, an overwhelming amount of budget spend has been allocated to “branding” = awareness, while ROI focused performance oriented methods such as PPC and CPA have been relegated to the digital ghetto in terms of mind share. With the economic recession mandated cut backs in branding dollars allocated to TV/Print combined with emergence of Google as arguably the largest advertising (or is it a technology?) company, performance based internet marketing can no longer be denied by brand advertisers as the most cost effective and job defensible alternative.
CEOs out there, take note – you have been getting wholesale ripped off for years. The time has come to re-evaluate the bottom line results you could have been enjoying for years as the performance baseline to move forward into the future. Your shareholders sure deserve better.
Thanks for the Mendez link, I'm just starting to get my head around the web advertising model.
I've known for a while that Google is more ABC/CBS/NBC than they are Microsoft/IBM/Apple. They produce their own shows (search, Gmail, Docs, Blogger) and buy up outside shows (some of which never get aired again). Underlying it all is advertising sales with the analytics toward conversions rather than viewership.
thx…love this learnbing process happening…at least for me :)
Well-said. The value of an impression is what the buyer will pay and the market will bear – it is not $0, but it is very, very (very) low.
Also need to consider inventory – during the Mad Men years there were only so many pages in Life Magazine (and only so many alternatives). These days inventory is effectively unlimited. The long-tail might work for search advertising but it's pretty tough to make it work for display.
I referred to this in the comments of the previous post, but performance versus brand is essentially the same distinction Claude Hopkins made in the 1920s.
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