Online Advertising Redux

Google was once merely a search engine. For years it focused ruthlessly on its core functionality--the math that drove the algorithm, which produced the most relevant search results. Their success produced all the traffic they could handle. But they didn’t sell anything. Then in 2002, it happened. Keyword based text ads stated appearing along the right column of search results. Suddenly lots of traffic was becoming lots of revenue. Shortly thereafter the Google AdWords program enabled advertisers to run almost instant campaigns using Google's self-serve, no-minimum bid, max-spend-per-day system. Google was quietly building up incredible profits, but exactly how much nobody knew--at least not until Google went public in August of 2004. (Images to the left show Google's growth since then and they just announced 63% profit on $3.66 billion in revenue, exceeding industry expectations again for the first quarter of 2007.) Once the world got its eyes on the unbelievable profits of Google AdWords, the wheels of online commerce began turning at rates unseen since the dot-com bubble era. But this time the bubble isn't full of gas; it's full of cash.

Google is still an excellent search engine, but as far as the kind of company it is, it's no longer merely a search engine. It's more like a media giant. Case in point: their recent announcement of the $3.1 billion acquisition of DoubleClick. Clearly Google is committed to maintaining their dominance as an online media machine. Oddly, its transformation into a media company is part of the reason they are having problems with both their $1.8 billion acquisition of YouTube and their copyright challenges regarding their book search feature. As a neutral search tool, indexing and retrieving data helps everyone and nobody would take a second look at their service. But with scads of cash in play, suddenly their marginally legal practices regarding storing of electronic copies of copyrighted materials no longer feels entirely neutral.

I review Google's history to emphasize how big online advertising is and how fast its growing. The thing that amazes me about Google’s AdWords program (as well as Yahoo! and MSN's advertising networks) is that, as big as they are, anyone with the smallest of ad budgets can easily participate. Just fill out a couple web forms and within minutes you're posting ads alongside search results. I’ve written about Online Advertising with Google AdWords and the basics covered in that newsletter are still the same. But there are new features, players and practices to review.

In the early days, online ads were bought by the impression or view (CPM). But willingness to pay per impression for online ads, especially untargeted impressions, was short lived. That's because ads have a lot of work to do if they are going to preempt the inertia of activity in order to arrest attention and gain an opportunity to sell. The scale of difficulty in gaining attention slides from hard to hardest based on the amount of inertia to overcome. TV commercials (assuming they're being seen) have a bit less inertia to deal with than a magazine ad. That's because people are fairly passive while waiting for a television program to resume. Magazine ads have a little more work compared to television because when people are reading a magazine article they are more actively engaged in the activity. Online ads are at the far end of the difficulty scale. People are highly engaged when pursuing an online activity. Halting this inertia is very difficult. So paying per impression, when a mere impression has so little impact, is onerous.

Pay per click makes buying online ads a bit more acceptable. But clicks aren't much more valuable than impressions if the visit doesn't result in an intended action. Ultimately, advertising is for selling. There is always a desired action when an ad is placed: a sale, generating a lead, web sign ups. Wouldn't it be awesome if we only had to pay for ads when these results occurred?

Pay Per Action is the newest feature (still in beta and by invitation only) of the Google AdWords program. The advertiser determines the action desired - either a sale, a sign up, or some minimum number of pages viewed - and the advertiser determines how much the action is worth to them. Web pages that are part of the desired result are embedded with triggers and only when sessions initiated by ad clicks include these pages, is the fee charged for the ad. Nice!

Google is running fast and furious while Yahoo! is lagging behind in the search advertising market. But they recently announced an improved advertising system called Panama. They have caught up with many of the features of Google's AdWords. I particularly like their keyword discovery system. It's not as flexible as Google's but it does help to identify the most productive phrases and how much it will cost to target each of these phrases. Another difference between Google and Yahoo! is their payment models. Google charges a credit card after delivering a certain quantity of clicks. Yahoo! requires an upfront deposit that it bills against until it's used up, and then charges the deposit fee again. Not a big deal, but Yahoo! does raise the bar for "trying out" their new service more than Google's billing process does.

Both Google and Yahoo! are offering a new feature that enables the creation of multiple versions of each online ad. They circulate these versions and track their relative performance to determine the best performing ads. Of course best clickthrough performance from the search engine is not necessarily the bottom line. For example, one ad version might show a higher clickthrough percentage than another, but if the visits from that version abandon the site more quickly than a lower clickthrough versions, the better performing ad may be preferred. That's why we built the NewfangeldCMS advanced website tracking tools so we can see what happens after the click--but that's another newsletter.

Geo-Targeting is not new but I realized that I forgot to mention this important feature of online search advertising in my previous newsletter. Geo-targeting helps local businesses advertise only within their service area. Clearly it would do no good for a plumber in Toledo to advertise his services on Google if his ad is just as likely to be displayed in Sarasota and Poughkeepsie. Selecting states and cities for online an ad campaigns opens up huge potential for local businesses. Especially given the rapid popularity of local search, geo-targeting makes online advertising effective for both big brands and small local services.

Another feature relevant to local search (and also one I did not mention in the previous newsletter) is pay per call. Similar to pay per action, pay per call services create 800 numbers that are displayed with an online ad which when called, redirect to the advertisers actual phone number. Google has experimented with "Click to Call" but the rest of the online advertising world seems to have chosen partnerships with third party pay per call providers like Ingenio (www.ingenio.com).

Website analytics software reports and evaluates overall website traffic. We currently use Urchin 5. Other players in the web analytics market include WebTrends, ClickTracks, and NetTracker. If your currently evaluating website analytics software keep your eyes on Seomoz.org, they are in the process of working up a robust comparison on all the popular analytics programs (see http://www.seomoz.org/blog/the-ultimate-analytics-comparison-project-needs-your-help). The June 2005 Web Smart newsletter covered Urchin version 6 which was shortly thereafter bought by Google and is now called Google Analytics. Google Analytics is free and can be implemented by simply adding a bit of code to the header of each page in a website. One of the nice features of Google Analytics is it's built in compatibility with Google AdWords. Traffic and goal conversion from AdWord campaigns is robustly reported along with all the other website traffic metrics.

To optimize an online ad campaign, most SEM experts would recommend the use of landing pages. A landing page is a custom page specifically built to follow up with an online ad message. Simply pointing an online ad to a site's homepage is not optimal. Instead pointing to "landing pages," designed to capture the interest of the respondent and hopefully encourage the fulfillment of a call to action, is a more productive process. I have not experimented much with landing pages for my online ad campaigns but here is what Stephen Fraser -former marketing director at Lulu.com who now runs digital media consultancy called Bug-Eyed Marketing - has to say about using landing pages effectively.

The most important skill you can bring to your marketing is an ability to see yourself through a customer's eyes. In the case of search engine advertising that means choosing the right words and phrases on which to advertise and writing effective text ads--both of which are skills that require time and practice to do well. But using landing pages for paid search campaigns is just as important. Even if your search campaigns chug along under their own steam without landing pages, whether you realize it or not ignoring them as the final step in optimizing your online marketing campaigns costs you money.

Think about it this way, if you ran a shop on a busy street you wouldn't put a great-looking green sweater on your window mannequin and then fail to place that same sweater on a sales rack in the front of the store, would you?

In thinking about landing pages, put yourself in the shoes of an individual who:
   a) Types a word or phrase into a search engine because he or she wants to learn more about that subject, whether it is trail running shoes or web hosting for businesses.
   b) Notices, reads, and choses to click a descriptive text ad that has appeared above or beside the search results delivered by the search engine.

Your job as a marketer is to anticipate and deliver as closely as possible exactly what that individual expects to see and do on that page. In the examples above, a store that wants to sell more trail running shoes would not only want to write a text ad addressed to that particular customer [Looking for trail running shoes? BigFootRunning offers more than 25 models. Fast shipping!], but in order to make the ad successful, it would also need to deliver the customer directly to a page that showed all 25 models of trail shoes, ideally with easy navigation either to learn more about or to buy any one of those models AND a well-displayed description of shipping speed. In the other example, a web hosting company would do well to write a text ad addressed to a business, rather than to individuals [Web Hosting for Business Compare plans ranked most reliable by independent reviews.]. But the landing page for that ad HAS to deliver the searcher to a page that outlines the business hosting plans available AND the independent reviews and rankings. Not to deliver that information would defeat the momentum generated by having persuaded the searcher to click in the first place.

While the text ads I just suggested are fictitious, the two images to the left show real world examples of businesses using landing pages specific to those two searches.

Another way of thinking about the use of landing pages is to consider customer segmentation, another basic principle in marketing. The greater your ability to segment your customers into distinct groups--groups whose needs, vocabulary, habits and preferences you understand and can address in both your product development and your marketing efforts--the greater your success and the more economical your marketing will be.

Optimizing your campaigns involves testing different landing pages as well as different ad text and phrases to discover the factors most likely to get a response from customers. It is in this area where Google and Yahoo! now offer tools to make marketers' lives a lot easier. Elements for testing include headlines and calls-to-action as well as images and colors. The goal is to identify the elements most likely to sway the decision whether or not to buy something (or download something, sign-up for something, etc.) from your company at that particular moment in time. "Testing" as a task may make it sound tedious, but another way to look at this is as a process of learning more about the people you care about, the folks who make your livelihood--your customers. You don't have a more important marketing task than that!

Stephen Fraser
Bug-Eyed Marketing

As I mentioned at the beginning online advertising is not just about search advertising. Banner ad placement, blog ads, rich media ads, online content sponsorship, email sponsorship and many other online opportunities are other effective forms of advertising. But with so many websites and so much content out there, building a media plan that identifies every appropriate venue is almost impossible. Fortunately there are many technology driven ad networks that can identify and deliver ads to proper online channels. Among these services are the blog ad networks mentioned in last months newsletter and other non-blog specific networks like Adify, Turn, DoubleClick, and BurstMedia among others.

Online advertising is a rich and growing market whose potential, richly demonstrated by Google, is just beginning to be understood, embraced and enjoyed. Nevertheless, it is just one component of the Advertising 2.0 digital media landscape. In coming months I'll continue addressing these main areas and discuss how all these pieces fit together and influence each other. It may be a lot to take in, but it is exciting and represents a lot of potential for advertising agencies and marketing firms that offer Advertising 2.0 services to their clients.