Does Web Advertising Work?
Zsolt Kerekes, Publisher, StorageSearch.com
Some quite distinguished experts have
said "No, it doesn't." They include:-
Philip Kotler who wrote Principles of Marketing, and is one of
the world's leading marketing gurus.
OK, you could disregard his opinion by cynically saying
"what does this guy know about the web anyway? And maybe he's just
inserting controversial quotes about the web into his 1999 press
interviews to help sell his latest book."
Fair enough, but Jakob Nielsen, whose
Useit.com/alertbox is
one of my own recommended web marketing bookmarks said in
September 1977 that
Advertising
Doesn't Work on the Web, a view he reaffirmed in his July 1999
article Web
Research: Believe the Data. In my opinion, Jakob Nielsen is
one of the world's leading experts about the web and successful
web site design. Nevertheless, I disagree with both of them, on
this question, as you would naturally expect, because if I didn't,
there would be no point in discussing web advertising any further,
and this would be a very short article indeed.
My own experience is that I have seen web advertising work very
well for the last three years, in my own neck of the computer
market (the Enterprise storage and Sun Microsystems compatible server markets). At this
point, you the reader, might get cynical, and say "Maybe it
works OK for publishers selling web advertising, sure I can
believe they make money, but what about the companies who are
buying the advertising space?"
Anecdotal feedback from many of my advertisers is:- "Web
advertising is now our biggest source of new leads, and the leads
we get from your site spend more, on average, than the leads we
get from other sources." In fact the customer renewal rates on my
site have been over 95% for a couple of years now, and as most of
my advertisers typically seem willing to spend much larger sums
year on year, there is enough evidence to convince me that web
advertising can work very well.
So how does this correlate with Kotler and Nielsen who both say
web advertising doesn't work. Some people are saying one thing,
while others are saying another. My answer is simple.
- Well executed web advertising, on well targeted media
works very well.
- Poorly conceived web advertising, on unfocused and
untargeted media works very badly (or not at all).
My guess is that these two esteemed marketers are talking about
the web advertising market as a whole, and not the potential of
the concept itself.
This is very similar to the experience of traditional direct
marketing, and you only have to look in your mail at home and at
work to see that the vast majority of companies which use direct
mail as a selling medium are actually incompetent in their
execution of it. They survive this incompetence because another
part of their organization is, in effect subsidizing this
activity. Maybe it's their direct sales force, or maybe it's their
reseller channels... However, it is important to make web
advertising work for your organization because it can result
in new customer acquisition costs
50 to
100 times lower cost that traditional forms of direct
marketing, and advertising in other media. That's a difference
which can't be ignored. It means that even a puny competitor which
executes web advertising effectively can outperform a competitor
which is more than 10 times its size. Alternatively, a web focused
competitor can destroy a similar sized competitor by using its web
marketing advantages to acquire and retain customers at lower
cost, while also reducing its product pricing.
We all know companies which are poor at marketing, however,
that doesn't mean that marketing planning, market research and
other marketing activities should be ignored. In the same way, the
concept and potential of web advertising should not be dismissed,
just because most companies are doing it badly.
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Why you should use banner
technology on your own web site
If your own web site does not include
the technology to run your own banner ads on it, you should
get it redesigned to support this feature as your #1 priority.
I'm not referring here to the style of banner ad which you run
on other people's sites to attract new readers. Instead, I'm
talking about using banner ad technology for a number of
different purpose which include:-
- making viewers aware of other content on your site
- measuring the interest levels (in real time) of
different subjects or news items which you add to your site
As a publisher I run what I refer to as "editorial" banner
ads on nearly every page on my web sites. This uses a simple
graphic, which is nearly always the same. Only the text, which
is a 1 to 4 line simple message ever changes. As a publisher,
I get the following benefits from this:-
- the editorial content of every page changes every time
the page is loaded, which makes the web site more
interesting without needing massive daily redesign
- I can use push technology to announce a new feature on
the web site on hundreds of pages within a few minutes of
thinking of the new idea. The new idea can be a new article.
Or if I have several news stories and don't know which one
to lead with, I'll try 2 or 3 of them for a few hours, and
then recode the home page to include the headline which
reader clicks have shown to be the most popular.
- The banner statistics tell me, typically within 24
hours, which subjects are good ideas, and which ones I
should drop
If you as a marketer within your own organization
get this technology running on your web site, you can, just
spending 15 minutes each day, analyze comparative sensitivity
to different wording which promotes new ideas and concepts, in
fact you have the technology to do real-time test marketing of
any new product idea. Use it for:-
- signposting articles, white papers
- promoting your latest press release
- telling customers that you changed your pricing
- see which message you should use in your next
advertising campaign
Some messages, like those about articles, can stay on the
banner mix for several months. Others, such as real-time news
should be changed every day.
I retrofitted editorial banner ads into my own site(s), so
I had to work within the constraints of the real estate which
was already there. I use a static GIF file which is 220 pixels
wide, and 80 pixels high. The text area has the same
background color as the web site, so that the text is not
boxed in. These banners run on the top left hand corner of
each page at the same level as the web site's own branding
image.
You should also run some of your advertising banner ads on
your own site. However, in that case the banner slot should be
a standard 468 x 60 slot, preferably at the bottom of each
page. That reinforces the banner ads which readers see on
other sites, and enables you measure in a controlled way,
which banner ads work better. Don't direct them to your home
page, but to the page which is most relevant to the message on
the banner.
Editorial banner ads are the most powerful technology
which you, as a marketer, will use on the web in the next few
years. Email your web designers now and get them onto it.
Make sure that the tools they give you let you design and
submit your own new banner within no more than a couple of
minutes. Otherwise change the web design team. The marketing
department should be the one in control of this part of your
web site, regardless of the high or low technology used
everywhere else.
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In most markets, classified advertising
offers you the best targeted advertising opportunities on the web.
It's something which many of the marketing people I speak to,
don't clearly understand. In my own web publications, we offer
both classified advertising and banner ads. Advertisers can use
either method on its own, or a mixture of both. Some examples of
classified advertising in the computer market include:-
- the promotion packages offered to members of most
industry trade
associations. Many of these trade associations don't
necessarily see these membership schemes as "advertising". But
that's a perfectly valid way of looking at them. If you pay your
membership fee, you get a certain amount of visibility on these
web sites.
- any logo, company profile or product description on the
SPARC Product
Directory is actually part of a classified advertising
package.
The main aspects of classified ads are:-
- they contain useful information (unlike most banner ads).
The information is usually a company profile or a product
description
- the classified ad is bought on a time basis for
example "1 year" instead of a number of views or clicks
basis such as a banner ad.
- the content of classified ads is regarded by most viewers in
the same way as editorial. That's because they correctly
assume that every company pays the same dollar amount for the
same quantity of visibility. The "ads" are usually information
that the viewer is actively looking for. That's why they came to
the web site in the first place.
- the company profile or product info, is on the same web site
as the link to it. That means the publisher gets the branding
benefits of the viewer seeing this info. The publisher can also
choose to run banner ads on these classified pages. That's quite
different to banner ads or "pay per click" search-engine
listings (such as GOTO.com)
in which the information is on the advertiser's site
Classified ads are good for advertisers, because typically the
pricing models, which originate in the pre-web era, are usually
unrelated to banner ad pricing. For example if you want a
qualified reader to see your new product info on the
SPARC Product
Directory, the classified ad will typically cost 10 times less
than achieving the same objective with a banner ad.
Classified ads are also good for publishers, because they
contain rich content which helps to attract more viewers.
There are, however, 2 main advantages that banner ads have
compared with classified ads:-
- Control. You can buy more impressions of banner advertising,
limited only by your advertising budget. Whereas once you have
set up your classified ad, you are totally dependent on how
successful the target publication is at attracting more viewers,
and, just as important, the total number of advertisers
in your own product category.
- Portability. Once it has been designed, the same banner ad
can be run on multiple web sites with little or no need for
customization. In contrast, classified ads are, by definition
unique to the web site on which they are running. Therefore more
marketing inputs are usually required to set up classified ads.
(On my own sites, we offer customers the free option of
creating the classified ads from the content we see on their own
main web site. But that's a service level to which most other
sites do not yet aspire.)
In conclusion, your company will get a lower cost per lead from
classified advertising, but a larger reach into your target
markets from banner advertising. You need to use both. In the long
term, new types of classified advertising products will be
developed by publishers, specifically for the mature web
advertising market. These include
sponsored news, and sponsored articles, some of which we look
at below. <back to
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What will happen to web ad pricing?
When I updated my business plan in the
early part of 1999, which was disclosed to current and
potential advertisers, the question of what would happen to
web ad pricing, and in particular, banner ad pricing was of great
interest. My concern at the time was to provide early warning to
my customers of the trends they would see, and help them include
these factors in their marketing budgets for the year or so ahead.
my analysis and conclusions haven't changed. When I first started
selling web advertising in January 1997, the market was new, and
the price was basically whatever you thought you could get. Early
web publications were mainly cushioned from making adverse pricing
decisions either because they funded by venture capital, or they
had alternative income streams from print advertising or mailing
list rental.
The factors which affect banner ad pricing are no different to
any other commodity:-
- factors in the external market - such as competing products
If we look at specifics:-
- The number of new web advertisers will grow at a faster rate
than the number of web viewers (or readers). The most mature
segment of the web advertising market is the computer segment
focused on Sun Microsystems and associated SPARC technology. But
even in this market, in Q1 2000 less than 5% of resellers
actually spend money on web advertising. By 2002 it will be 100%
(of those which are still in business). If we look at the number
of advertisers that translates to a 450% annual increase. But if
we measure by dollar value, the trend I have been seeing is that
web advertisers start to switch more money into web advertising
after they have had a year or so of good experiences with it. If
we take the 2 factors together, the demand for web advertising
(in this market which is much further down the learning curve
than any other web advertising market segment) could easily be
greater than 5,000% per annum.
- If we look at the supply side. The rate of reader growth, in
this market segment, even assuming that the market grows at a
healthy rate, is unlikely to be above 50% per annum.
- In a mature business to business
market, the trend on the web seems to be that a greater
percentage of readers get channeled through a smaller number of major web sites (or
portals) than would be the case with physical media such as
print. So the number of targeted publications which a potential
advertiser can use to reach a critical mass in their market, is
actually reducing.
What does this mean? - In the business to business
world, demand for advertising so greatly exceeds supply that most
publications do not need to work at getting new business. It will
come to them anyway. What happens next depends on the strategy of
each publisher. In the long term it makes sense for publications
to retain customers by providing a good channel to their market.
Also, the introduction of high added value and customized
advertising products (described in other parts of this article)
can create unique opportunities for synergy in which the
publication actually becomes an integral part of the advertiser's
sales and marketing force.
In the consumer world, the critical factors in my view are:-
- huge growth in sites which carry consumer ads - everyone
wants to be the next Yahoo
- very poor results from consumer advertising - due to poor
targeting and lack of synergy (most of the time) between
advertiser, publication and reader
The result in the consumer world will be that banner ad pricing
will drop to a fraction of what it is today, because there's a lot
of unsold inventory on consumer sites, and the results advertisers
get are so poor. In Q1 2000, there is already a 10 to 1 difference
in published banner ad rates between high end BtoB and consumer
publications. The real difference, if you're actually spending
money is more like 20 to 1. These 2 markets are quite different
today, and likely to remain so until the venture capital which
props up many of these consumer sites starts to run out.
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Why you should sponsor articles
Your engineering team has just written a
wonderful white paper which describes your latest technology. Or
your marketing department has just written a market report which
links together the disparate parts of your market and shows why
your company is the logical lynch pin, or next leader. You want
lots of people to read so what do you do?
Traditional approach - pre 2000
- Try to be nice to some editors in industry leading journals,
in the hope that they will publish it (or a story about it).
- Put a copy on your web site and hope someone will read it
- Print thousands of copies and distribute them in your
mailshots and newsletters.
- Run the article as advertorial in a printed magazine. But
how can you be sure that anyone reads it?
New approach - you don't have to be nice to editors
any more
- Run an editorial banner ad on your own site, which promotes
the article. This will show you how much interest there really
is.
- Find a leading web publication in your industry which
accepts sponsored articles. (If they don't understand the
concept - refer them to this article.) Determine how many
readers you want to read your article, and agree a price per
article view, and a time period. Then place an order. That's how
easy it should be, and that's how easy it will be.
Sponsored articles are a win-win situation for advertisers and
publishers. Publishers which can run a mixture of articles on
their sites which can be loosely classified as:-
- Public service articles:- these are ones which the
publisher runs free, because they love publishing and it's good
for reader retention and keeps potential advertisers looking at
the web site
- Self interest articles:- these are the articles that
are important to the publisher to establish branding, identity
and loyalty. We do this to make our publication different from
everywhere else, and because someone
in the business still enjoys writing stuff.
- Better than selling banner ads articles:- if you look
at the cost of acquiring qualified eyeballs, a street smart
advertiser can save a huge sum of money by paying maybe 30 cents
for each article viewed (Q1 2000 pricing). At the same time a
publisher can be getting 5 times as much as they typically
charge for a banner ad on a similar page, plus have the
additional income from running banner advertising there as well.
It's the publisher's responsibility to make sure that they use
the right kind of signposting on their own site such as
search-engine fixing, editorial banner ads and prioritized links
so that the advertiser gets the quantity they need.
In my own publications I report on contributed article views
(for advertisers who are running these articles) alongside the
weekly banner ad, and classified page view reports that my
customers already get. There's a learning curve associated with
this concept. Advertisers have to be confident that it will work.
Publishers have to be confident that they are getting material
which is acceptable to their readers. In the longer term, web
publishers will also offer to write these articles as part of a
complete service package. This is a similar concept to the
newsletter or house magazine concept in the printed world. The
difference is that there is more immediate accountability.
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