Online Text Ads Most Clicked, Why Bother with CPC?

Ed: Advertisers and agencies working too hard to get readers to click. Why bother?

Online Text Ads Most Clicked, Only Young Like Video

Despite current buzz around fancy and expensive video ads, only 11% of consumers say they are likely to click on them, compared with 25% who would likely click on simple text ads and 20% who would click on right banners, according to a study from iPerceptions, Inc.

Though video ads are unpopular overall, the under-25 set is more likely to click on them than on any other type of ad. This age group accounts for nearly one-third of the video-ad viewing audience.

First-time visitors to a site and those with lower incomes also are more likely to click on video ads than other ad types.

The study found a strong relationship between income and likelihood of clicking. As consumers’ incomes rise, they become less likely to click on ads. On average, 40% of consumers likely to click on any ad make less than $50K a year – and only 15% make more than $150K. The income gap is most pronounced with video ads, with 49% of consumers likely to click on video ads making less than $50K a year – and only 13% making over $150K.

Click frequency also increases as site loyalty rises. Across the board, 65% of consumers likely to click on online ads are weekly or daily browsers on a site, and only 15% are first-time visitors and 6% are sporadic visitors…

STATS: CPC up, CPM down

Ed: Compete.com reports 35.7% YOY growth in number of USA search. Google CFO reports paid click growth of 18%. CTR declined by 13%. Fewer % of people clicked on ads. 

Average CPC improved 2%, not enough to offset the CTR decline, and much less than reported by Efficient Frontier. 

Affiliate’s share of the pie is bigger, but proportionally smaller, and shared among more affiliates. I wouldn’t be surprised if the average affiliate share declined. ;^)

Google growth is sustained by overall Internet growth, both domestically and internationally. There seems to be no indication that the hundreds of improvements per month has substantially changed CTR or CPC – particularly for affiliates.

All Eyes On Google This Week

Google, whose stock is down 45% this year, announces third quarter financial results tomorrow, and Silicon Valley will be watching. Analysts expect revenues of a little over $4 billion and EPS of $4.79 – and most have price targets for the stock, which closed yesterday at $363, to bounce back up to the high 500’s.

For now, the big factors affecting Google are the strengthening dollar (half their revenue is outside the U.S.) and general pessimism about the advertising market moving forward. There are also concerns about the intense regulatory scrutiny of the Google/Yahoo search deal.

Beyond this quarter, though, no one really has any idea how Google will do, and that uncertainty is what’s driving Google’s stock down. A declining stock market means less consumer spending, which then means less advertising dollars flowing as well. But what isn’t certain is how that will impact Internet advertising, which is still taking share from more traditional ad spending.

Citi analyst Mark Mahaney, who’s targeting Google stock at $590, thinks Google is in a good position to weather a storm: “GOOG is the market share leader – and is gaining share – in arguably the most dynamic part of Internet advertising – search, which appears to be less impacted by the current macro economic environment,” he said in a recent preview report for the fiscal quarter. He also sees strong growth potential for non-search ads through YouTube and DoubleClick. ComScore is reporting that the growth in the number of searches on Google accelerated in September.

Display Ad Prices Trending Downward; Fall-Off Is Consistent, But Not ‘Dramatic’—Pubmatic

Here’s some more evidence of how bad things are… The average price of a display ad was 27 cents in Q3, a nearly 50 percent drop from Q407’s 50 cents, according to Pubmatic, which sells software optimization tools to ad networks and has been surveying prices for the past four months. In Q1, the company said the average price of a display ad was 37 cents, while from Q2’s price was 34 cents, said Pubmatic, which bases itsPubMatic AdPrice Index (PDF) on a survey of roughly 5,000 websites mostly in the U.S. 

Google CFO:

We had another solid q, despite a challenging economic environment

gross revenue up 31 % yoy to $5.5B
Google.com was up 34% yoy to $2.7B
AdSense up 15% yoy to $1.7B

paid click growth up 18% yoy, up 4% q over q
US revenues up 22% yoy to $2.7B, up 5% q over q

International revenue:

UK showed some softness, essentially flat Q over Q,

rest of EMEA performed better, relatively good performance in Netherlands and Germany,.

Also good performance in Brazil and China.

Why Google’s Partners Should Be Worried

Google today announced its third-quarter 2008 earnings — which were in line with investor expectations, thus giving market a reason to exhale. For the quarter, Google reported net income of $1.35 billion on sales of $5.54 billion.

Google’s partners however, should gulp hard, for the Mountain View, Calif.-based search and online advertising company is keeping more and more of its online ad bounty for itself. You can see that from the three metrics: revenues from Google-owned sites, revenue generated by partner sites and the traffic acquisition costs. Google’s partners’ piece of the pie isn’t growing that much. Check out the table:

	Q3 2008	Q2 2008	Q3 2007
Google-owned site Revenues	$3.67 billion (67% of total revenues)	$3.53 billion (66% of total revenues)	$2.73 billion (65% of total revenues)
Revenues from Partners	$1.68 billion(30% of total revenues)	$1.66 billion (31% of total revenues)	$1.45 billion (34% of total revenues)
TAC	$1.5 billion (28% of total revenues)	$1.47 billion (28% of total revenues)	$1.22 billion (29% of total revenues)

What that table is saying is that Google today is less reliant on partners for ad inventory. This shift isn’t going to change anytime soon, especially as Google launches more and more ad-supported services and finds new users for Google Mail and Google Android.

Google Gains 2 Points of Search Share in Q3, CPCs rise on Google Search and Content

Today we released the Efficient Frontier Q3 2008 U.S. Search Engine Performance Report. which analyzes the performance of Google, Yahoo, and Microsoft Live Search on search engine spending, CTR, CPC and ROI from advertisers in the Efficient Frontier Client Index. Because conditions in the finance sector have been so volatile over the past year, trends were reported separately for financial services advertisers and non-financial services advertisers.

Google continued to gain share for all advertisers over last year, capturing 76% the share of total search engine spending in Q3, up 2.1 percentage points from Q3 2007. That gain in share was largely due to growth in Google content spending, which increased from 2.6% to 4.6% of spending from Q3 2007 to Q3 2008. Content spending increased by 82.8% YOY  in Q3 2008 for non-financial services advertisers, and by 16.6% in financial services.

A look at trends in CPCs across search and content gives an indication of why advertisers are investing more in Google content and continue to spend on Yahoo and Microsoft Live Search. On a YOY basis CPCs on Google search increased by 8.3% and 4.7% respectively for financial and non-financial services advertisers. CPCs declined YOY for Microsoft Live Search and Yahoo Search, with the exception of CPCs on Microsoft Live Search for non-financial services advertisers, which were up 6%. Google content CPCs increased by 20% for non-financial services advertisers, but at $0.28 a click, Google content is still 53% cheaper than Google search, which averaged $0.61 per click in Q3.

The report also found that, in an increasingly unstable economic environment, ROI improved on all three major search engines in Q3 2008 on a YOY basis. Google search ROI for non-financial services advertisers increased by 11.3%, Yahoo search by 19.7% and Microsoft Live Search by 29.9% YOY.

For more findings from the report, read our press release, or download the full report here.

Nielsen/Norman Group Says Banners Don’t Work

What If You Ran an Ad, and Nobody Saw It?

Jakob Nielsen knows web users. The Nielsen/Norman Group, which he co-founded, has tested thousands of sites. It’s watched more than 3,000 users try to perform tasks online, even following their eyes to see where they look. And he has some frightening news:

Nobody looks at picture advertising.

Nielsen, in a keynote address at the inaugural Web Experience Forum in Boston, Mass., said web design is doomed to failure unless we learn from end users. And one major lesson is that other than paid search, ads don’t work.

“We call this banner blindness — people won’t see ads at all,” said Nielsen. “Ads might as well not exist as far as users are concerned, except for search ads.” The number of web users that so much as glance at banner ads, he added, is too small to even quantify.

The findings are no secret to web usability professionals gathered here, who obsess over how consumers use the web. But they’re often ignored by ad buyers.

“For the longest time, the web has been in collective denial of this phenomenon,” said Nielsen. “People still have this old media thinking: They think of the web being similar to TV because it’s on the screen and visual. The main distinction is whether it’s active or passive, not whether it’s on a screen or not.”

Advertising revenues, which pay for much of the web, are having a rough year, with some analysts cutting their estimates for the entire sector.

Nielsen pointed out that paid search still works — partly because it’s relevant, and partly because users aren’t tuning ads out. “We thought we’d find [paid search] box blindness the way we did banner blindness, but that’s not the case. Users are interested in search ads and actually look at them.”

Federated Media Unleashes The Conversation As An Ad

Federated Media (our advertising partner) has been experimenting with “conversational marketing” almost since their launch in 2005. Today they are launching a new marketing toolbox for advertisers which gives them tools to track all the ways users interact with these ads.

The goal, says Federated Media, isn’t just to track ad impressions and clicks, but also to look at a new set of metrics like posts, trackbacks, votes, RSS subscriptions, comments, etc, where users somehow interact with the advertisement and talk about it. Hopefully, a conversation occurs between users, the ad publisher and the advertiser, which gives the advertiser’s brand more face time. An old example of this is Hakia’s ad that asks bloggers what better search means. Other examples are here.

The definition of conversational marketing is a little squishy. But the general idea, which Federated Media founder John Battelle writes about in the primer below, is that you as an advertiser figure out which content sites best associate with your brand, and then you grab the leader in that space and pay them to start conversations on your behalf:

Early efforts didn’t pan out so well as authors were accused of conflicts of interest – users didn’t know where editorial stopped and advertorial began. It’s not clear those issues have been resolved, but Federated Media says a proper disclosure policy is the right place to start.

Convinced? It’s certainly controversial, but brands love it because they get a higher return on their advertising investment. That means it’s here to stay.

What’s the best display ad size for your website?

by jeremyliew

Many websites default to the 728×90 (leaderboard) ad size when designing their site. This is a reasonably good option as it has the second highest click through rate of the various standard ad units. But it is possible to do better. Marketing Sherpa researched clickthrough rates by ad size (from largest ad unit to smallest) recently:

The chart shows that click through rate is not simply a function of the size of the ad. The largest ad unit, the wide skyscraper (160×600) has the second lowest click through rate. For the full range of IAB standard ad units, click here.

Ed: These Click Rates are all pathetic. Can we do better?

Rallying Cry for Display Ads

Microsoft, Others Say Online Banners Trump Search Ads

Display ads have fallen on hard times. The graphic ads that border a Web page are among the slowest-growing formats in the online-ad marketplace, and they are seen by many marketers as stodgy and ineffective.

But some ad-technology and Web-measurement companies are trying to engineer a comeback for display ads, offering data that they say show display advertising is more effective than marketers think. Microsoft is the latest company to make this declaration, with new evidence coming next week that it says proves display ads are actually better than searches at triggering consumers.

Companies like Microsoft have a financial interest …