Quick, name the last two online advertisements you’ve seen.
Too hard? O.K., name the last online advertisement you clicked on. (I mean intentionally, not because it slipped under your cursor while you browsed People.com.)
Can’t think of anything? Being able to tune out ads might make your Web-browsing more enjoyable, but it’s a dilemma for online advertisers struggling to find niches in the cluttered columns of their Web pages.
Online ads are fighting for air on the forest floor of the Internet, where Flash images and written content soak up reader attention. Those rough conditions have encouraged wide experimentation, with limited results. For example, one innovation called the click-to-pay method only charges advertisers when browsers click on their icon. But click-to-pay can be expensive—as much as $2 per hit—and up to 50% of clicks are unintentional or even fraudulent.
To be fair, online advertising has some advantages. Web sites have extraordinary access to consumers, tracking clicking behavior and reader attention-span to sharpen their ad target. Google’s AdSense has been at the vanguard of these reforms. But its contextual advertisements, which use keywords to generate ad placement, can yield both accurate and absurd results. For example, a Google search for Eliot Spitzer generates sidebar ads for The New York Times (which broke the original story about the Governor’s scandal)— and “Client 9” T-shirts.
Contextual advertising makes search engines look like gold mines to ad companies, but they’re also raking in consumer ire and privacy concerns. The backlash comes from browsers who think the data-mining and keyword-spying constitute privacy violations. This has executives worrying that their strength—easy access to consumer patterns and preferences—could also be a weakness if the counterattack has teeth.
None of this means online ads are entirely doomed. The technology is improving and ad companies are learning how to target consumers better. But online ads won’t pay until they learn how to make us pay attention.
Internet ads are here to stay; thinking otherwise is just nonsense. The movement to the Web is a natural progression for advertising, which has existed for ages, an early form of it dating back to 4000 BCE on Indian rock art.
The 17th century brought advertisements to newspapers. Then, as eyeballs moved toward TV in the 20th century, the advertisers followed. And now that the Web has become a global tool—according to a 2008 IDC report on consumer behavior, almost half of total media consumption is online—and you can rest assured that advertisers are, yet again, following.
Last year, $27 billion was spent online globally, representing a mere 7% of total advertising budgets, so there’s plenty of room to grow. And because today’s ad market spans the globe—30% to 50% of U.S. Web site traffic comes from international visitors—it is less susceptible to the domestic economy.
Many say Internet ads are too pervasive and hence ignored; I believe that, just like traditional media, they’re absolutely noticed when they’re relevant, as proven by higher click-through and response rates to better-targeted ads.
Today’s ad market has networks that serve as “agents” for advertisers, helping them spend money online. As founder and chief executive officer of the Rubicon Project, a service for Web sites that optimizes ad networks to make more money from ad space, I see this trend continuing. Seven years ago there were 15 of these networks; today, more than 300.
These networks differentiate themselves through geographic focus, pricing models (cost per thousand views, clicks, actions), vertical specialties (sports, travel, and gender-specific, to name a few), and format (text, banner, video ads).
Industry analysts predict Web-ad spending will jump to $62 billion by 2012. If this is a false market, it sure has a lot of people fooled. At the very least we’ve come a long way from pictures on rocks.Opinions and conclusions expressed in the BusinessWeek.com Debate Room do not necessarily reflect the views of BusinessWeek, BusinessWeek.com, or The McGraw-Hill Companies.
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