Musings on online advertising, the data layer, audience targeting/optimization, life, and my hobbies. (All opinions are my own, and not necessarily those of past, present or future employers, family, friends or foes!)
Banner advertising, especially using large ad networks, isn't very profitable. For advertisers, it's a black box of publishers -- you don't know what's working so your optimization efforts are limited. For publishers, it's usually untargeted advertising and something you do with all your remnant inventory. You book the tag in your ad server along with several other networks (since one network alone usually can't increase your sell-through to 100%), and do your best to optimize your eCPM.
Google has been achieving/offering vastly improved eCPM, so why then buy a traditional ad network which is far less profitable than their own business? There are a few reasons:
Changing their creative. The AdSense ad unit is old and far along the lifecycle of creative effectiveness. Everyone has seen it, so click-through is stale. Google is looking to couple their contextual/behavioral technology with display ads.
New publishers. The AdSense network appeals to a certain Web site size/type, and they're now facing market saturation -- new publisher sign-ups have to be slowing. Larger Web sites don't use Google AdSense and have a far greater reach. They use ad networks to sell their remnant inventory though, so this is a quick way for Google to add a relatively small number of publishers, but a HUGE number of page views.
Data. In the end, it's all about the data for Google. What with AdSense and Google Analytics tag proliferation across hundreds of thousands of Web sites, Google toolbar users, and of course 60%(ish) of all search queries, they already have an impressive data stream to crunch. About the only thing they *didn't* have is their ad tag on hundreds of the more popular sites that sell their own display advertising.
It's all about profiling and monetizing those profiles with relevant advertising. They know much more about each one of us than you think. The next obvious step for Google was display advertising, and if they can build a long-tail of display advertisers like they did with keyword/text advertisers, while leveraging their profiling data and auction bidding system, they can make a ton more money for themselves and publishers.
Google isn't a search company, they are a "user profiling and advertising" company.
Mike referred me tonight to this article by Jakob Nielsen on how search engines are acting as leeches on the Web. While it's a fairly old article (from January 2006), it's only more relevant today.
The article speaks to the vicious cycle of search engine marketing for companies, and how competition for keywords, SEO and landing page optimization are driving up the cost of targeted online advertising -- and only the search engines benefit. This is also why (a) demand for contextual/behavioral ad inventory will always exceed supply (as long as companies meet their cost-per-action requirements), and (b) social media and word-of-mouth is SO important to companies.
I recently caught up with David Sifry's bi-annual State of the Blogosphere, in which he gives some interesting data and trend analysis. He's been tracking the number of blogs, posts per day, new blogs per day, languages, etc. for 4 full years now. Key takeaways include:
70M weblogs tracked by Technorati now, up from 57M in hist October 2006 report. Whereas the blogosphere HAD been doubling every 6 months since March 2003, it's now doubling in size about every 320 days.
Roughly 120K new blogs are created every day, or 1.4 per second.
1.5M posts per day or 17 posts per second, compared to 1.2M in October 2006.
Japanese is the #1 blogging language at 37% (of blogs), followed by English at 33% and Chinese at 8%.
I can't say enough good things about the program I recently joined called Entrepreneurs Anonymous. I'm finally getting help for my addiction!
Several of us entrepreneurs got together and created this satirical program modeled after AA, and it's been fun. We're also working on a video. Those who also suffer from the entrepreneurial affliction can join, tell their story and also comment/commiserate with others!