Convince and Convert Blog: Where Social Media and Email Collide

A groundbreaking study by the Interactive Advertising Bureau (IAB) and Bain & Company shows that ad networks’ share of display ad sales soared from 5% to 30% from 2006-2007. (Read the excellent full report here)

It seems the rise in Internet advertising (~20% per year, according to eMarketer) is creating a flurry of new sites, and a scenario where established sites keep adding more content, and thus more ad inventory.

For agencies, the opportunity is tremendous because ad networks charge $2-$3 per one thousand ad impressions, while buying ads direct from a site can run $20 or more. Certainly, sites often hold back premier ad placements for direct sales, giving ad networks less attractive, run of site inventory. However, if one ad buy is at a $2 CPM, and the other ad buy is at a $20 CPM, it is extremely unlikely that the premium inventory will perform 10 TIMES better than the non-premium placements.

There are literally dozens of ad networks now, each willing to place ads for your clients on Web sites, including highly targeted behavioral and retargeting opportunities. (Decent list of reputable ad networks here) Given that you can buy solid inventory at a fraction of the cost, why wouldn’t you use ad networks almost exclusively, especially for test campaigns when you’re trying to optimize creative and call to action? (my blog post on how to optimize online ads)

From 2006 to 2007, sell out rate (the percentage of overall ad inventory sold) by premium publishers covered in the IAB study actually went UP from 55% to 72%, but that was due almost entirely to the huge increase in ad network placements. Thus, sites are turning more and more of their ad inventory over to networks that are paying them a pittance for it, figuring “some dollars are better than no dollars.” This of course is true in the short-term, but eventually this house of cards will fall.

Sites cannot continue to sell an increasing share of their ads at a couple bucks per thousand, unless their content creation overhead is extremely low. And even ad networks that are booming at present with a 600% annual growth rate, cannot sustain it. As more ad networks come online, downward price pressure will only increase, making it difficult for ad networks to make much margin on their arbitrage. Failures and consolidation will occur quickly.

Advice for Agencies

Consequently, my advice for agencies is to use ad networks as much as possible for your online media purchases, especially in the testing phase. However, use first-tier networks at all times, and use multiple networks.

Realize that your preferred network may not be around very long, and when the consolidation begins, it will happen FAST, so make sure your in-house team (either media or account executives) legitimately know enough to be dangerous about Internet advertising placement to keep you in the game if the precarious ad network situation blows up in your face.

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In a shocking (and embarassing) revelation today, AdWeek uncovered that of the 56 world-class digital marketing agencies featured in their Annual Report Card, just 5 are purchasing their own brand names in PPC.

In fairness to the firms, most of them appear at or near the top of organic search results for their own brand names, but several studies have shown that click through rates (and conversion rates) typically increase when your brand is at the top of BOTH organic and paid search results. Incidentally, this is why the notion of dropping your paid search when you achieve organic search success is a bit of fallacy.

Also of note are smaller firms that are purchasing competitors’ brand names in PPC and showing up in paid search results. A crafty tactic, to be sure. Note that current case law says that you can in fact purchase competitors’ names and trademarks as a search term, but you cannot use those trademarks in your actual PPC ad copy.

If you’re an agency, why would you NOT cover as many bases as possible with your organic and paid search marketing efforts? The costs are minuscule and the results can be significant. In fact, at Off Madison Ave and Mighty Interactive (where I handle strategy and ideas), search marketing has long been a primary driver of serious new business leads.

If even the big digital shops aren’t buying their own brands in paid search, how many traditional agencies are doing so? If you’re not playing in this sandbox, get on it. You could literally have a campaign up by the end of the day. Similar Posts That You Might Enjoy

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Malcolm Gladwell is an author, pundit, and Carrot Top doppelganger who doles out bite-sized business wisdom like popcorn chicken. He posits in The Tipping Point that when enough of the right people start to perpetuate a trend, it can catch fire and grow geometrically almost overnight. 2006 will be the year that local online advertising experiences this tipping point phenomenon.

On a national level, online advertising is rebounding like Dennis Rodman, with overall ad spending up to a projected $11.2 billion in 2005, headed toward $18.5 billion in 2008, according to eMarketer. Huge traditional advertisers like Ford, McDonald’s, and Proctor & Gamble are moving marketing dollars toward online initiatives.

But locally, despite impressive year over year growth rates (46% increase in 2005 predicts Borrell Associates), online advertising remains somewhat of a novelty. Not the “Potato Chip That Looks Like the Virgin Mary” novelty it was just a few years ago, but there are still dozens of major Arizona companies that advertise offline, but have yet to dive into the online ad baptismal.

In fact, according to a comprehensive Borrell Associates survey, the Phoenix metropolitan area ranks just 29th in local online ad spending, but is the 15th largest media market based on Arbitron data. This means of course, that when it comes to local online advertising, Phoenix is getting beaten out by the likes of Albany (12th), Tampa (17th), and Hartford (26th).  Tucson is the number sixty one media market, but is just 93rd in local online ad spend, falling behind Waco – ouch.

Hartfordians better watch their backs, however, because this is the year that Arizona gets serious about online advertising.

The word is out about Arizona. Service businesses, franchise eateries, and new companies of every shape and description are moving in to grab their piece of the massive growth in our state. Old line Arizona companies will increasingly find themselves under siege by hungry, clever competitors whose tactics go well beyond creating name recognition through hollow, repetitive broadcast ads.

The comparatively low cost of Internet advertising, combined with the ability to precisely target prospective customers and measure results definitively will make it the marketing weapon of choice in competitive categories.

Many Arizona companies – new and old – are mid-sized. Most don’t have large, centralized marketing teams, relying instead on a mix of in-house personnel and outsourced expertise. Consequently, the advertising decisions of major local advertisers are significantly influenced by the opinions of their ad agencies.

In the past two years, most ad agencies in the state have added online capabilities or at least a partnership with an interactive firm. Historically, most of those capabilities have centered around Web site design – the showiest part of the business – but several sources in the online ad business say that recently major agencies have emitted sincere-sounding oohs and aahs about serious online ad programs for their clients.

Also fueling the local online ad boom in 2006 is the proliferation of legitimate sites on which to advertise. The Arizona Republic’s azcentral.com has long been the dominant local Web site on which to advertise – with some competition from Channel 3’s longstanding azfamily.com. Now, however, broadcasters have figured out what Channel 3 learned long ago – a good Web site generates revenue. Note the revamped or expanded sites from KNXV (abc15.com), KSAZ (fox10.com), KPHO (kpho.com), KASW (quick6.com), the various Clear Channel Radio sites, and KTAR (ktar.com).

All offer good online ad opportunities on sites that were once collectively a waste of good pixels. Plus, each of these sites have charged their sales teams with pushing online ads, and many have tied part of sales reps’ compensation to online sales success.

This combination of increased business competition, Internet savvy agencies, improved local Web sites, and motivated salespeople will combine to create a state-wide culture that finally puts the emphasis on Internet advertising that we’ve lacked for too long.Similar Posts That You Might Enjoy

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