Digitalwall: New Era of Online Advertising (2) from Exposure to Deal

In the future, a number of advertising models, including the traditional online advertising, keyword advertising and commission-based advertising, will coexist on the Internet.

[+] Who on earth are viewing and clicking online ads?

Advertising, which, in a sense, is a joint game of the media and ad clients intending to fool consumers around, seems increasingly unable to adapt to the current time. With the rise of the interactive media led by the Internet, the say has been returned to consumers. As a result, raising the eyeballs of consumers is increasingly turning into a mission impossible.

Each time I give a lecture about online marketing, I always make a survey about the audience and ask those who have clicked any online ad within the past half year to raise their hand. There always have been very few hands raised in a large classroom. That explains why the ad click rate on portals' home page is lower than 0.1%.

Think about yourself: have you ever clicked any online ad within the past half year? Or, have you paid any serious attention to any online ad at any part of a web page, even though you never clicked it? Ask those around you the same questions.

If neither you, nor I, nor he, nor she is viewing ads, who on earth is? With my observation, I am able to provide a simple answer: "those who do view online ads are a strange group of people." Whenever I make such a conclusion, the audience would smile understandingly.

Yes, such people are born to view online ads. They have a gene inside their body to drive them to notice and click ads on web pages. Besides, advertising professionals view ads too, mostly out of job habits, instead of personal liking. Others just do not view ads, and there is no reason for that.

[+] Keyword advertising: the model that charges by results

The keyword advertising is the hope for online ads whose click rate is as low as 0.1%. This adverting model, which is Google's source of revenue, is one of the most important inventions in the history of the Internet. By linking ads with key words used by searching activities of Internet users, it raises the click rate to 5% and even higher.

The reason for the low click rate of traditional online ads is the irrelevance between the contents of ads and the web pages that the user is viewing. Channel-specific advertising (for example, ads for 3C commodities on a technology channel) might help to lock on the wanted users, but it is far less accurate than the keyword advertising.

The tide of the keyword advertising explains that the result is what ad clients really want. Brand building is very important, but whether it has to depend on, or even mainly on the Internet is another question. The building of a brand is not the accumulation of many ads displayed.

Companies which can directly satisfy that demand will win the favor of Internet users and ad clients. However, this does not mean that traditional online advertising models will disappear. They will manage to maintain a certain market share, but will not be able to stop the aggressive attacks of the keyword advertising.

According to Online Advertising Revenue Report 2005 released by the Interactive Advertising Bureau (IAB), the revenue achieved by the keyword advertising of search engines accounted for 40% of the industrial total, slight above the number of 39% in the previous year and indicating a stable trend.

[+] Turning to the channels: to pay in accordance with actual results

The most distinct feature of the keyword advertising is its click-based charging model. How much to pay for each click and where your ad will be put on the web page depends on the price you offer in an open bidding process. The higher your price is, the better the position will be.

This, however, is not exactly what ad clients want. They have never given up the idea of "pay in accordance with the number of deals resulting from the ad". Those who click the keyword ads and are led to the websites of an ad client might not do what the ad client wants them to do, such as buying products, registering as a member, and etc.

With the blood of innovation, Google is planning to cater for that call and start its trials. You might have already noticed that the banner or text ads of the FireFox browser or Google's Picasa (picture management software) are already available on many websites.

Ad clients are charged only when the software is downloaded and installed by users (who can use the service free of charge, as Google will pay the website owner). No charge for ad playing, or ad clicks-only for download and software installation.

That model can be further extended to allow charging only for products sold, or members registered or newsletter subscribed to. This is inevitably going to drive the focus of the online advertising to move from the media identity featured with exposure to the channel identity featured with real deals.

[+] Traditional online advertising is not going to be replaced completely.

This advertising model might not be suitable for some commodities, just like the keyword ads model is not suitable for every product. What can be predicted is the ad price for each deal will be higher than that for each exposure time or each click in traditional models.

As a matter of fact, there is a normal correlation between the click rate and the conversion rate (the number of clicks divided by the number of deals achieved). Both the ad client and the ad seller have something to gain. The key is whether the ad client is from an industry lucrative enough to pay the higher deal-based ad charges.

In the future, a number of advertising models, including the traditional online advertising, keyword advertising and deal-based advertising will coexist on the Internet. There's not such a thing as the best advertising model in the world, only the most suitable model for oneself. Anyhow, more options are not a bad thing for ad clients. (
2006/07/23 - By Digitalwall.com - Way to
China Internet/Telecom )