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The ad-supported web: Will it fall under its own weight?

Phillip Nones Uncategorized , , , , , , , , ,

Banner advertisingFor the past (nearly) 20 years, the biggest thing that’s kept the Internet free for users is advertising – banner display advertising in particular.

Bloggers and other online publishers large and small rely on revenue from web banner ads to fund their activities. That’s because the vast majority of them don’t have pay walls … nor do they sell much in the way of products and services.

Because of this, the temptation is for publishers to serve up as many display ads as possible on each page.

It’s not unusual to see web pages that tile ten or more ads in the right-hand column. Usually the content of these ads has no relevance to readers, and the overall appearance isn’t conducive at all to reader engagement, either.

And that’s the problem.

Because of conditioning, people don’t even “see” these ads anymore. The advertising space has become one big blur – as easy to gloss over as if the ads weren’t even there to begin with.  (When’s the last time you clicked on a banner ad?)

Attempts to come up with other display advertising types – pop-ups and pop-unders, animations and other rich media, skycrapers and so forth – haven’t done much to change the picture. Indeed, they’re so ubiquitous – and so predictable – we don’t even consider the ads to be annoying anymore; they’re just part of the “décor.”

I’ve blogged before about how clickthrough rates on banner advertising are bouncing along in the basement, making them less and less valuable for advertisers to consider placing. And ads that are priced on a pay-per-click basis can’t be giving advertisers much in the way of revenue either, since relevance and engagement rates are so abysmally low.

The bottom line is that we now have a “lose-lose-lose” situation in online advertising:

  • Advertisers lose because of near-zero user engagement, thereby limiting their potential to drive business.
  • Publishers lose because ad revenues aren’t sufficient to bankroll their activities.
  • Readers lose because of lack of relevance and an incredible degree of page clutter.

So it seems that the ad-supported online publishing model is in a bit of a fix – and the question is how things can evolve to create a more satisfying result for all parties.

I’d be interested in hearing your thoughts on this issue:  What will online publishing look like in another five or ten years?  Anyone willing to hazard a guess?

Google Gone Wild: Has its AdWords pay-per-click program become too costly for businesses?

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Google advertisingNo one should be surprised by the huge success of Google’s AdWords pay-per-click advertising program. Almost single-handedly, that service has vaulted the company into the top ranks of U.S. corporations.

And why not? As an advertising concept, pay-per-click has no peer. Capturing the attention of customers when they’re in the midst of searching for specific goods and services is the ultimate in effective targeting.

What’s more, Google’s pioneering advertising model, where advertisers set their own bid pricing and pay only when someone clicks on a link to their web landing pages, made the program affordable for everyone – from the biggest national brands down to the neighborhood store.

Google also offered all sorts of geographic and time-of-day filters to make it easier for businesses to target people at the right time and the right place … yet another boon to smaller businesses that otherwise couldn’t hope to compete against the big national players.

Many advertisers were able to participate in pay-per-click programs at a fraction of the cost of traditional display advertising, where advertisers pay significant fees up-front for “wait and wish for” customer engagement.

A few years back, it wasn’t unusual to be able to conduct a lucrative AdWords program bidding, with clickthrough pricing running well below $1 per click.

Because Google continues to possess the lion’s share of search activity (two-thirds or more of all search volume despite the best efforts of Bing/Yahoo and others to chip away at it), it was only natural for more and more advertisers to gravitate to Google’s AdWords program as the best venue for pay-per-click advertising.

But the temptation to get in the game has had the predictable result: pay-per-click bid rates have been climbing steadily.

Whereas before, an advertiser could expect to get good exposure on search results pages with a modest bid, it’s not possible to accomplish that anymore without bidding $5, $10, $15 or even more per click.

That’s beginning to drive some businesses away – particularly smaller ones without the deep pockets of the big firms.  For for many of them, it’s simply not sustainable to pay that much money just to get someone to visit their website.

AdGooroo, a search intelligence database firm that studies the pay-per-click market, reports that ~96% of pay-per-click advertisers spend less than $10,000 per month on such programs. That compares to millions of dollars spent by the largest companies.

Richard Stokes, AdGooroo’s founder, states this: “The only way for smaller advertisers to get an edge is to spend a lot of time improving the quality and relevance of their ads. The problem is that everyone else is doing that as well.”

So where does this leave us now? We’re beginning to get some hints that Google may have tapped out on advertiser demand. Some companies are dropping pay-per-click programs altogether, while others are scaling back while redirecting resources to other forms of promotion – traditional and social.

We have additional proof of this in the earnings report filed by Google just last week. The company reported that advertising sales continue to grow, but at a slowing rate.

And even more interestingly, average cost-per-click rates have declined by ~15%. That’s the first-ever decline since the AdWords program was launched.

Here’s another development:  heightened interest and focus on obtaining better natural search rankings by optimizing websites for content relevance.

Imagine that:  companies looking for ways to make their websites more relevant to viewers as well as search engine bots!

The heightened SEO emphasis has worked for many companies – at least up until now. Google may want to increase advertising revenues, but it also wants to ensure that its search functionality continues to deliver the most relevant and quality results so that users don’t begin to migrate to other search platforms.

But some advertisers may be wondering if the “Chinese wall” between advertising and natural search is as high or as airtight as it once was. They contend that their natural search rankings seem to perform better when they’re also actively engaged in pay-per-click advertising campaigns … and perform less well when they’re not.

Whether there’s any actual proof of this happening is mere conjecture. After all, the same company that runs AdWords is also running the search algorithms. So there’s really no way to prove this from the outside looking in.

Golfers’ Paradise: Portland? Seattle?? Rochester???

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Golfing at Stone Creek Golf Course, with view of Mt. Hood
Keeping your eye on the ball is a bit more challenging at Stone Creek Golf Course, with dramatic views of Mt. Hood ready to distract at every turn …

I live in the Mid-Atlantic region of the country. And around these parts, a vacation often takes golf lovers to North Carolina, or maybe to Florida or Scottsdale in the winter months. (Scotland is the “Holy Grail” of golf destinations, of course.)

So I was somewhat surprised to read that Golf magazine has come up with some pretty big surprises in its listing of the “Top 10 U.S. Cities” for golf, published in August.

The list was developed in conjunction with the National Golf Foundation, so presumably it was compiled with the input of the “leading authorities” in the sport.

Some of the cities on the Top Ten list come as little surprise:

  • #3:  Las Vegas, NV
  • #5:  Orlando, FL
  • #7:  San José, CA

A few others wouldn’t necessarily be ones I would have thought of initially, but they do make sense:

  • #2: Columbus, OH  (the birthplace of Jack Nicklaus)
  • #4: Dallas, TX  (more than 100 golf courses are open to the public)
  • #8: Atlanta, GA  (the Sugarloaf course is here, along with two PGA Tour sites)

That leaves four other cities that I was surprised to see listed at all:

#10 is Rochester, NY  –  This city might have ranked higher for golf in my book than Buffalo or Cleveland, but to make the “Ten Best” list is … remarkable. It was included because there are ~65 golf courses, and median green fees are a huge bargain at just ~$30.

#9 is Portland, OR  –  I would have thought “weather issues” would make this city a non-contender, but Golf magazine found otherwise. Moreover, there are ~50 courses including Stone Creek Golf Club with its dramatic views of Mount Hood.

#6 is Seattle, WA  –  Wouldn’t the (rainy/cloudy) weather be even more of an issue here than in Portland? Evidently not, as Golf magazine ranked it among the top six cities, noting 60+ courses and median green fees of around $45.

And #1 is … Austin, TX —  This city was so-named because it “has the nation’s best combination of weather, name [course] designs, and affordable, accessible golf.”

It looks like the golf lovers among us will need to start expanding our horizons when it comes to vacation destinations.

Hmm, I wonder what our spouses will think of spending an exciting week in Austin, Columbus or Rochester …?

The Free Lunch Ends on Facebook

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Promoted posts on Facebook is the only way to get exposure anymore.
Promoted posts are the only way to ensure decent exposure on Facebook now.

It had to happen.  Suffering from a raft of unflattering news stories about its inability to monetize the Facebook business model and under withering criticism from investors whose post-IPO stock price has been battered, Facebook has been rolling out new policies aimed at redressing the situation.

The result?  No longer can companies or organizations utilize Facebook as a way to advance their brand “on the cheap.”

Under a program that began rolling out this summer and has snowballed in recent months, businesses must pay Facebook anywhere from a fiver to triple figures to “promote” each of their posts to the people who have “liked” their pages plus the friends of those users.

And woe to the company that doesn’t choose to play along or “pay along” … because the average percentage of fans who sees any given non-promoted post has plummeted to … just 16%, according to digital marketing intelligence firm comScore.

Facebook views this as a pretty significant play, because its research shows that Facebook friends rarely visit a brand’s Facebook page on a proactive basis. 

Instead, the vast degree of interaction with brands on Facebook comes from viewing newsfeed posts that appear on a user’s own Facebook wall.

What this means is that the effort that goes into creating a brand page on Facebook, along with a stream of compelling content, is pretty much wasted if abrand isn’t  willing to spend the bucks to “buy”exposure on other pages.

So the new situation in an ever-changing environment boils down to this:

  • Company or brand pages on Facebook are (still) free to create.  
  • To increase reach, companies undertake to juice the volume of “likes” and “fans” through coupons, sweepstakes, contests and other schemes that cost money.
  • And now, companies must spend more money to “promote” their updates on their fan’s own wall pages.  Otherwise, only a fraction of them will ever see them.

Something else seems clear as well:  The promotion dollars are becoming serious money. 

Even for a local or regional supplier of products or services that wishes to promote its brand to its fan base, a yearly budget of $5,000 to $10,000 is likely what’s required take to generate an meaningful degree of exposure.

Many small businesses were attracted to Facebook initially because of its free platform and potential reach to many people.  Some use Facebook as their de facto web presence and haven’t even bothered to build their own proprietary websites.

So the latest moves by Facebook come as a pretty big dash of cold water.  It’s particularly tough for smaller businesses, where a $10,000 or $20,000 advertising investment is a major budget item, not a blip on the marketing radar screen.

What’s the alternative?  Alas, pretty much all of the other important social platforms have wised up, it seems. 

For those businesses who may wish to scout around for other places in cyberspace where they can piggyback their marketing efforts on a free platform, they won’t find all that much out there anymore.  Everyone seems to be busily implementing “pay-to-play” schemes as well.

FourSquare now has “promoted updates” in which businesses pay to be listed higher in search results on its mobile app.  And LinkedIn has an entire suite of “pay-for” options for promoting companies and brands to target audiences.

It’s clearly a new world in the social sphere … but one that reverts back to the traditional advertising monetary model:  “How much money do you have to spend?”

“Corporate Speak”: Updating the Buzzword Baedeker

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Corporate buzzwords
Corporate buzzwords: Meaningless blather, signifying nothing.

All of us are familiar with them: jargon words and phrases that have become so overused, they’re nothing more than meaningless noise.

These are the so-called “descriptive” terms that are meant to add flavor and emphasis to a particular subject, but are more likely to make you want to roll your eyes – or maybe even reach for the nearest comfort bag.

Traditionally, the worst offenders have been high technology companies and other B-to-B firms when it comes buzzwords. But we’ve been seeing the phenomenon leech into consumer categories as well, such as automobiles and healthcare services.

Even worse, we’re now seeing a new generation of buzzwords coming to light, joining the veteran terms that have been plaguing us for years now.

Some of the old standbys are still overused today, unfortunately.  They include terms like:

  • Cutting-edge
  • Flexible
  • Next generation (or the too-cute variation NextGen)
  • Out-of-the-box
  • Partnering
  • Robust
  • Seamless
  • Solutions provider
  • Synergies
  • Toolbox
  • Turnkey
  • Value-added
  • World-class

Today, one may be more likely to encounter a crop of more contemporary-sounding – but equally obnoxious – phrases such as these:

  • Best-of-breed
  • Best practices
  • Core competency
  • Groundbreaking
  • Integrated
  • Mission-critical
  • Scalable
  • Thought leader

Much as we’d like for these buzzwords to just go away quietly, that’s hardly likely. And there’ll be plenty more new ones to come along in the future.

In fact, marketing strategist David Meerman Scott and others are already taking a stab at predicting tomorrow’s new buzz terms. You can view one such prediction here.

Unfortunately, there aren’t any buzz-cuts in the offing when it comes to lowering the level of “corporate noise” out there, however welcome that might be …

So if you can’t beat ’em … join ’em.  Are there any particularly irritating buzz terms you encounber that aren’t noted above?  Post a comment and let’s see what we can add to the list.

Consumer buying behaviors: The power of choice … or not?

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Toothpaste Aisle -- too many choicesIf you were to poll consumers, most would probably tell you that they love to be given many choices or options when it comes to merchandise and services.

And why not? Everyone recalls hearing about the “bad old days” of the Soviet Union and Communist China, when people had the choice of one type of bread or one color of clothing.

In the United States and other Western economies, we’ve long provided consumers a vast array of selection — sometimes with very little actual differentiation.  And those choices have proliferated all the more in recent years. 

[Take a walk up the toothpaste aisle at your local retail store and you’ll see “product choice, circa 2012″  in action – and on steroids.]

From the mundane to the important in goods and services, we have more choices today than ever before. But how well are we coping with having all of these options?

Not well at all, according to Barry Schwartz, the author of an important book on the topic. His book, The Paradox of Choice: Why More is Less, was published back in 2005 but is still quite timely today – perhaps even more when considering what’s happened in the ensuing years to things like the latest range of satellite television viewing package offerings from DirecTV.

Dr. Schwartz, who is a professor of social theory at Swarthmore College, posits that people are often overwhelmed by everyday decisions that have become increasingly complex due to the burgeoning number of available choices and options.

This over-abundance of choice happens not merely in the realm of toothpaste, but also in big decision areas such as selecting a healthcare provider, making investment decisions, deciding whether to move to a new city or state, or selecting a college or other educational program.

According to Dr. Schwartz, this is what often happens when confronted by so many choices:

 People question their decisions before they even make them

 The myriad of choices can set up unrealistically high expectations

 Depending on the importance of the decision to be made, too many choices can actually lead to decision-making paralysis

At what point the lines of “too few choices à la Havana” and “too many choices à la Atlanta” cross, differs depending on the situation: What might be a beautiful array of options for one person may induce an unacceptable degree of stress for another.

Dr. Schwartz lays out a number of suggestions for people who find that the bevy of choices produces too much stress, too much anxiety, or simply too much “busyness” in their lives. In turn, Harvard Business Review bloggers Anna Bird, Karen Freeman and Patrick Spenner help by coming at it from the other side.

This trio of business writers tells marketers, “If customers ask for more choice, don’t listen.” Their advice, as paraphrased by search marketing über-specialist Gord Hotchkiss, is this:

“The harder consumers find it to make purchase decisions, the more likely they are to overthink the decision and repeatedly change their minds or give up on the purchase altogether. In fact, regression analysis points to decision complexity and resulting cognitive overload as the single biggest barrier to purchase.

“Provide them with fewer choices, and make them as relevant and compelling as possible. Ease the burden of risk by providing information that reassures.”

Hotchkiss offers a few additional words of wisdom as well:

“Realize that one of the components of risk is the degree of bias in the information we’re given. If that information reeks of marketing hyperbole, it will be discounted immediately.”

So the bottom line for marketers could be this:  Simplifying product and service offerings may deliver just what consumers actually need (as opposed to what they say) … while also making employees’ lives in the product management department a whole lot easier.

What’s the value of a consumer’s time spent online?

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The value of a consumer's time onlineIf you’ve ever wondered what the “value” is of a consumer spending time online, we have some answers courtesy of SumAll, a data visualization company.

SumAll has tapped into Google Analytics data to study patterns across ~10,000 customers and nearly $1 billion worth of transactions. What it finds is that a minute of time spent by a consumer “e-window shopping” is worth an average of 43 cents.

SumAll also calculates that one full visit to an e-commerce site is worth ~$1.30.

The company has been tracking this sort of information for a number of years, so we have some comparative statistics we can observe. In 2012, SumAll finds that the average amount of time spent per site declined by approximately 14% — from 3 minutes, 16 seconds in 2011 to 2 minutes, 49 seconds today.

Despite that decrease in time spent per online visit, the revenue generated per visit actually grew by ~24%.

What’s the reason? “Buyers are more accustomed to buying online, so the hesitation is dropping,” Dane Atkinson, SumAll’s CEO claims.

The SumAll data also suggest that an average consumer spending 1 minute, 54 seconds on a site is the amount of time needed in order for the e-retailer to make a dollar in sales.

The SumAll report concludes that a balance needs to be struck on e-commerce sites between having enough depth to be interesting … but not so much as to be overwhelming, with too many products offered and/or undue difficulty in illuminating the payment path for buyers.

According to Atkinson, aiming for an average e-commerce visit of three to four minutes is a good goal for engaging customers without confusing them with too many options.

Finally, we see from the trend data that there has been a dramatic decrease in the amount of minutes spent on a site to result in a dollar sale: it was charted at over 5 minutes back in 2009, more than three times 2012’s findings.

I guess we’ve become more nimble than ever buying online.

TMI: The Seduction of Data

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The Seduction of DataIt was the Roman philosopher Seneca who once remarked, “The abundance of books is a distraction.”

(He said it in Latin, of course.)

Fast-forward 2,000 years … and we’re dealing with the same phenomenon – on steroids.

Jonathan Spira, author of the book Overload: How Too Much Information is Hazardous to your Organization, calculates that “info-inundation” and the productivity inefficiencies that emanate from it costs the U.S. economy around $1 trillion per year.

But how can anyone combat the information explosion and not risk missing out on something important? After all, no one wants to be left behind when it comes to “knowing what needs to be known.”

But there are some small things you can do to help control your information environment. Spira and others suggest a few tips:

  • Skim and scan information first rather than digging deep from the get-go. More than 80% of it is likely dispensable.
  • Set aside some quality “thinking time” to properly digest what is truly important from what you just consumed.
  • Engage in more “real-time” interactions with colleagues rather than wasting energy over long e-communiqués and missed communications.

A related issue is whether “too much” information actually hinders good decision-making. That possibility was studied by psychologists at Princeton University and Stanford University more than a dozen years ago in research that seems even more pertinent and consequential today.

The researchers studied two groups of people. Each group was presented the same set-up: A person with a well-paying job and a solid credit history is applying for a bank loan. The issue facing the two groups is whether to reject the loan application because a background check has uncovered the fact that for the past three months the loan applicant has not paid on a debt to his charge card account.

Group A was informed that the amount of the card account charge was $5,000 … while Group B was told that the amount was either $5,000 or $25,000. Participants could decide to approve or reject the application immediately, or they could hold off making their decision until more information was available.

It was later revealed to Group B participants that the applicant’s debt was only $5,000 rather than $25,000. So eventually both sets of participants had the same information upon which to make their decision.

The experiment’s findings, published in a report titled On the Pursuit and Misuse of Useless Information, revealed the interesting final result: In what clearly should be a cut-and-dried decision to reject the loan application, more than 70% of Group 1 participants dutifully did just that. They rejected the loan application, properly protecting the bank from undue financial risk.

Group 2? Only about 20% rejected the application.

The Princeton/Stanford study concluded that even though both groups possessed the same exact information, Group 2 revealed an intriguing blind spot when it comes to the way many people make decisions: They’re passionately interested in filling information gaps.

But the compulsion to seek out the added information can actually lead people to delay making decisions for too long … or ultimately to make the wrong one.

Making the siren call of info-inundation all the more dangerous, the explosion of information that’s at our fingertips thanks to the Internet means there’s always “one more report” … ” one more evaluation” … “one more perspective” to seek out and consider.

It’s the seduction of data … where sometimes “more” can be “less.”

Newspaper Ad Revenues Plummet to a 60-year Inflation-adjusted Low

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Newspaper advertising revenues decline to 1950 levels in inflation-adjusted dollars.Newspaper ad revenues have now collapsed to a level not seen since the 1950s in inflation-adjusted dollars. 

That’s the sobering conclusion from the Newspaper Association of America’s release of the most recent advertising revenue figures for the U.S. industry.

With these dismal statistics, the newspaper industry seems sure to contract even further, while getting precious little boost from their online advertising activities.

Clearly, when it comes to media, it’s “out with the old” and “in with the new” …