Thursday, February 21, 2008

All Along It Really Has Been All About the Eyeballs

When I moved from working in the internet B2B space to the internet B2C space in the summer of 2006, I quickly grasped what I had only partially comprehended previously - that the "free" consumer internet economy is entirely based on people clicking through sponsored search listings, banner ads and other paid placements. I quickly concluded that were two types of people in the world - those that clicked on sponsored listings and those that didn't. Recent market research directly illustrates that point. 6% of internet users generate 50% of the ad clicks. Furthermore, those clickers constitute the demographic least likely to complete an online purchase.

The more finally honed this research becomes over time, the more internet advertisers will learn that the inputs don't equal the outputs in the click ad model. In fact, the whole business is much like the greater fool theory in which the existing players profit off the willingness of new players to enter and profit themselves. If ever, new entrants start to decline or find new and inventive ways to drive traffic to their sites and capitalize on their presence, then the click market as a whole will begin to dry up and the master click arbitrager at the top will need to innovate or die.

All this brings me to the idea of internet advertising as a whole and its relationship to television advertising. Why has television advertising been wildly successful and internet advertising not so much as reported above? For instance, an advertiser will pay a lot more for 30 seconds on network television, while relying on old fashioned methods to determine the impact they've had on the viewer and the subsequent return on investment, where as web ads come a lot cheaper but offer far more information regarding their actual utility to the advertiser. What web advertisers are coming to realize as television advertisers did as well generations ago is that it is all about the eyeballs after all, which is of course what we all said at the dawn of the internet anyway. As clicks come to be devalued as junk, the cost of spot based advertising will rise. Thus companies with something to sell online will compete to have their ads displayed in as many prominent locations on the web as possible and not be nearly as concerned as making sure that the click through is monetized. In fact, they may not even pay for the click at all.

Spot based advertising on the web of course has a much higher value than it does in old media, as we know so much more about you from the scripts running on the site while you are there. The effectiveness of the campaign will be far more easy to characterize for the advertiser then it ever was on TV. And as old and new media inevitably converge, web ads are becoming more and more like their television predecessors. The circle is complete.

2 comments:

Andres Galdames said...

The sad part of it all is that as you stated, it's a lot easier to track online ads that TV ads or pretty much any other form of advertising. The problem is that everyone seems to be obsessed with the "push" side of advertising and not so much on the "pull".

I work for a web analytics company and I can't tell you how many times people buy our software (which kicks butt) and use it to track stats rather than to do what it was intended for. Analysis. They don't want to see how visitors from distinct campaigns are behaving on the site as opposed to just wanting to see how many visitors they got from the campaign. It's even worse than the "let's through some mud against a wall and see what sticks" mentality. It's more of a "let's just try to measure how much mud we threw and not even bother checking how much sticks" mentality.

Taking a look at raw stats is useless. If that's what you want, then good luck with your free stat counter you pasted into your site. Web analytics is a lot easier than people think. It's not a technical thing, it's all about good old fashion business sense.

I digress. Now who wants to hear funny stories about Tony from high school?

Tony Casson said...

Andres,

I don't remember high school. Anything you say might be true. I just won't be able to confirm it. Nice comment though, thanks.

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