Saturday
Google 'nearly ready' to float
Search engine Google, owner of one of the most powerful brands on the internet, is now close to floating its shares for the first time, according to a swathe of media reports.
The firm has contacted more than a dozen investment banks to help arrange a share sale, and has already drawn up a shortlist, the Wall Street Journal reported.
According to Reuters, a flotation of the privately-owned firm is pencilled in for early next year, a deal that could value Google at up to $25bn (?14.7bn) - slightly more than listed online retailer Amazon.
The Financial Times, meanwhile, reported that Google planned to sell shares by means of an online auction - an unusual method which would aim to avoid the sort of brokerage scandals seen in some share flotations in the 1990s.
There are a lot of businesses that would have done better if they'd not had so much money flowing into them Sergey Brin, Google co-founder.
In addition, analysts say the time is ripe for a hi-tech flotation, as investors are starting to return to the long-shunned market.
An initial public offering on the sort of scale Google is reportedly contemplating would be by far the biggest share launch since hi-tech markets turned sour three years ago.
The sheer size of the deal makes it likely that Google will choose an investment bank-led transaction, rather than selling shares directly to the public online.
Friday's reports cited unnamed sources within Google; the company itself has refused to comment.
Google based on word googol, which refers to the number represented by 1 followed by 100 zeros
At the same time, it has shunned the sort of corporate trappings - notably advertising - that have transformed rivals such as Yahoo.
Google does not publish financial statements, but is believed to be highly profitable, earning money mainly by sponsored searches and by licensing its search technology.
Estimates of its annual revenue range from $500m to $1bn, with profits at least at $100m.
The firm has contacted more than a dozen investment banks to help arrange a share sale, and has already drawn up a shortlist, the Wall Street Journal reported.
According to Reuters, a flotation of the privately-owned firm is pencilled in for early next year, a deal that could value Google at up to $25bn (?14.7bn) - slightly more than listed online retailer Amazon.
The Financial Times, meanwhile, reported that Google planned to sell shares by means of an online auction - an unusual method which would aim to avoid the sort of brokerage scandals seen in some share flotations in the 1990s.
Canny timing
Google's intention to sell shares has never been in doubt: such a move would raise capital, and enable the firm to motivate staff with perks such as stock options.There are a lot of businesses that would have done better if they'd not had so much money flowing into them Sergey Brin, Google co-founder.
In addition, analysts say the time is ripe for a hi-tech flotation, as investors are starting to return to the long-shunned market.
An initial public offering on the sort of scale Google is reportedly contemplating would be by far the biggest share launch since hi-tech markets turned sour three years ago.
The sheer size of the deal makes it likely that Google will choose an investment bank-led transaction, rather than selling shares directly to the public online.
Friday's reports cited unnamed sources within Google; the company itself has refused to comment.
In the black
Google has built up a formidable reputation in the crowded search-engine market, mainly thanks to its uncannily accurate relevance-based search techniques.Google based on word googol, which refers to the number represented by 1 followed by 100 zeros
At the same time, it has shunned the sort of corporate trappings - notably advertising - that have transformed rivals such as Yahoo.
Google does not publish financial statements, but is believed to be highly profitable, earning money mainly by sponsored searches and by licensing its search technology.
Estimates of its annual revenue range from $500m to $1bn, with profits at least at $100m.
GOOGLE FACTS
200 million searches a day
3.1 billion web pages indexed
More than 1,000 employees
Thursday
Auto Industry Has Shifted $ Online
According to a new report from Borrell Associates, the automotive industry is spending tens of millions of dollars online, money once earmarked almost exclusively for television branding campaigns.
On the local level alone, dealers are spending two-thirds of what they spend on local TV advertising on Internet applications.
From a revenue perspective, daily newspapers may be in the lead, taking the most dollars in most local markets and leveraging their traditional relationships with car dealers by offering them online add-ons. In fact, newspapers cumulatively will generate about $150 million in online automotive advertising this year, a quarter of which will be “new” to newspapers rather than shifted from print, according to Borrell Associates’ research.
However, AutoTrader.com is not far behind, with approximately $120 million in revenues, an impressive achievement given that it is a single, concentrated site. It’s clearly the leader from a listings and dealer-relationship perspective, according to the research company.
The major portals (including eBay Motors) lead from a unique visitor or audience size perspective. The portal sites are geared to deliver a national audience to automobile manufacturers, who are primarily seeking “eyeballs” for their increasingly elaborate high-bandwidth ads. By contrast, automotive sites with local audiences are focused on delivering results for car dealers in their markets in the form of showroom traffic and specific leads.
The big losers, to date, have been local TV stations, which have failed to seize the online opportunity inherent in the automotive market, their largest advertiser segment. Borrell Associates estimates that local stations will generate less than $30 million from online automotive applications in 2003. While auto advertisers are besieged with online applications, research has found that nearly two-thirds of local TV stations don’t have even a rudimentary one to offer.
On the local level alone, dealers are spending two-thirds of what they spend on local TV advertising on Internet applications.
From a revenue perspective, daily newspapers may be in the lead, taking the most dollars in most local markets and leveraging their traditional relationships with car dealers by offering them online add-ons. In fact, newspapers cumulatively will generate about $150 million in online automotive advertising this year, a quarter of which will be “new” to newspapers rather than shifted from print, according to Borrell Associates’ research.
However, AutoTrader.com is not far behind, with approximately $120 million in revenues, an impressive achievement given that it is a single, concentrated site. It’s clearly the leader from a listings and dealer-relationship perspective, according to the research company.
The major portals (including eBay Motors) lead from a unique visitor or audience size perspective. The portal sites are geared to deliver a national audience to automobile manufacturers, who are primarily seeking “eyeballs” for their increasingly elaborate high-bandwidth ads. By contrast, automotive sites with local audiences are focused on delivering results for car dealers in their markets in the form of showroom traffic and specific leads.
The big losers, to date, have been local TV stations, which have failed to seize the online opportunity inherent in the automotive market, their largest advertiser segment. Borrell Associates estimates that local stations will generate less than $30 million from online automotive applications in 2003. While auto advertisers are besieged with online applications, research has found that nearly two-thirds of local TV stations don’t have even a rudimentary one to offer.
Net Community is 150 Million Strong
MSN Microsoft Sites headed up the comScore Media Metrix list of Top 50 Internet Properties, viewed by a population of American Internet users, higher than ever before.
When rating the Top 50 U.S. Internet Properties for September, comScore Media Metrix announced that the U.S. Internet population has passed the 150 million mark for the first time. Time spent on the Internet also went up 3% from August, a change driven by university students returning to school.
"That this medium has now crossed a threshold of 150 million users is a reminder that while it continues to mature, the Web also continues to expand its reach among the total U.S. population every day," says Peter Daboll, president of comScore Media Metrix.
Newcomers to the list include Verisign Sites, which moved from a rank of 135 in August to number 11 in September. This was due to the launch of SiteFinder, which redirects mistyped URL addresses to the Verisign Site, driving a 540% increase of unique visitors.
Other big movers in September: The NFL Internet Group moved up 15 places and Emode.com and Columbia House Sites entered the list in the last two spots.
"In September, a number of events impacted Americans' use of the Internet, including Hurricane Isabel, the kickoff of the NFL season and students returning to school," says Daboll.
Hurricane Isabel drove a 10% increase to properties in the online weather category. The Department of Commerce, which oversees the National Oceanic and Atmospheric Administration, brought in 45% more visitors seeking official updates on the storm.
The National Football League season and Major League Baseball sent 4.5 million fans to the sports category, up 9% from August. ESPN drew 17.6 million unique visitors, up 14%. Yahoo! Sports also had an increase in pages viewed and time spent on the site.
The Retail-Food Category had the smallest audience but the biggest increase, up 17%. Promotional activity benefited Cooking.com, OmahaSteaks.com and Schwans.com.
The Online-Trading and Entertainment-Music categories experienced a 5% growth. And with the start of school, properties such as Reference.com, Encyclopedia Britannica and Family Education Network were consulted for educational and other resources.
When rating the Top 50 U.S. Internet Properties for September, comScore Media Metrix announced that the U.S. Internet population has passed the 150 million mark for the first time. Time spent on the Internet also went up 3% from August, a change driven by university students returning to school.
"That this medium has now crossed a threshold of 150 million users is a reminder that while it continues to mature, the Web also continues to expand its reach among the total U.S. population every day," says Peter Daboll, president of comScore Media Metrix.
Newcomers to the list include Verisign Sites, which moved from a rank of 135 in August to number 11 in September. This was due to the launch of SiteFinder, which redirects mistyped URL addresses to the Verisign Site, driving a 540% increase of unique visitors.
Other big movers in September: The NFL Internet Group moved up 15 places and Emode.com and Columbia House Sites entered the list in the last two spots.
"In September, a number of events impacted Americans' use of the Internet, including Hurricane Isabel, the kickoff of the NFL season and students returning to school," says Daboll.
Hurricane Isabel drove a 10% increase to properties in the online weather category. The Department of Commerce, which oversees the National Oceanic and Atmospheric Administration, brought in 45% more visitors seeking official updates on the storm.
The National Football League season and Major League Baseball sent 4.5 million fans to the sports category, up 9% from August. ESPN drew 17.6 million unique visitors, up 14%. Yahoo! Sports also had an increase in pages viewed and time spent on the site.
The Retail-Food Category had the smallest audience but the biggest increase, up 17%. Promotional activity benefited Cooking.com, OmahaSteaks.com and Schwans.com.
The Online-Trading and Entertainment-Music categories experienced a 5% growth. And with the start of school, properties such as Reference.com, Encyclopedia Britannica and Family Education Network were consulted for educational and other resources.
Find detailed statistics here...
Taiwanese Market Seen Ripe For Dot-Com Rebound
Many of today's office workers start their day checking e-mail and catching up on the latest news over the Web. For less serious users, online gaming tops their list of things to do on the Internet. Search engines have become indispensable tools for researchers, journalists and anybody who loves information. Clearly, the Internet is weaving itself deeper and deeper into people's lives, and service providers are gradually shedding the bearing of apprehensiveness they adopted following the dot-com crash.
A few short years ago, the future seemed bleak for dot-com businesses. Companies that had been riding the wave of the information revolution went bust overnight. Even those that survived the dot-com bust have had to struggle to get out of the red. Early this year, Taiwan's major Web portals reported significant growth in sales--something industry watchers say could be heralding a better future for dot-coms.
Yahoo!Taiwan--a 2001 merger of Yahoo! Inc.'s Taiwan Web presence and an operation called Kimo--began reporting profits in the third quarter of last year. Currently the largest Internet portal in Taiwan, Yahoo!Taiwan recently reported third-quarter revenues of US$10.5 million, a 28-percent increase over the previous quarter. Revenues from advertising--which also saw a 23-percent surge--accounted for 69 percent of total earnings. According to company sources, the number of unique hits, or non-repeat visitors, on its portal in August reached 9.28 million. Users spent an average of 426 minutes a month on the site. These are strong numbers.
Other companies, though they have a smaller share of the market, have managed to break even. PC Home Online, Taiwan's second-largest Internet portal, saw its revenue reach US$17.9 million in the first half of this year, an increase of 213 percent from the same period last year, according to market manager Vicky Tseng. "We were still in the red last year, but so far this year, we have been able to make profits every month." Equally buoyant is the team at Yam Digital Technology, one of the oldest portals in Taiwan. Ily Wang, assistant manager of public relations, said the company expects to see its after-tax profits hit US$1 million. Advertising revenue is expected to grow by at least 70 percent.
"We indeed have reason to be optimistic about the future of dot-com businesses," said Liu Fang-mei, a project manager at Institute for Information Industry's Focus on Internet News and Data research group. "The industry has been growing continuously despite the darker days of two years ago, when people's enthusiasm for investing in Internet stocks suddenly went cold." With all the recent hype surrounding portal profitability, headlines have announced that the dot-com business is heading for another golden age. Tseng, however, characterized such proclamations as erroneous, saying that the previous dot-com bubble resulted from people's false expectations of the new medium. "Vendors and users expected too much, too fast," she said. People's understanding of the golden days was reflected in the soaring stock prices, rather than the positive interaction made possible between the new technology and humanity, Tseng explained.
"The Internet industry has never really taken off," she stressed. "Dot-com growth is always there. In fact, we are still in preliminary development." The latest report of a boom seems only natural. "As the years have gone by, companies have settled on viable business models and the Internet has become an essential part of most people's lives. All this has led to a dynamic development of the industry," she said.
By the end of June, the number of people with Internet access in Taiwan--meaning those having active registered accounts with service providers--reached 8.76 million. The figure for broadband subscribers stands at 2.45 million.
Analysts believe that the general business community is more willing to invest in Internet stocks than it was after the dot-com crash. Advertisers are indicative of this trend. "More and more business executives began vying for the attention of young people. While there are many types of media through which companies can gain exposure, the Internet is nevertheless the best choice if you want to reach out to the younger demographic," Liu said.
Internet advertising methods have evolved since the days of old-fashioned banner ads. Programming advances allow companies to market their wares with flash animations, pop-up windows and an array of ever more creative schemes to develop what marketing experts call mind share, which is the degree to which their brand is easily remembered by a target consumer group.
Thanks to new technology, advertisers can interact with users more directly and reach their target consumers more easily. The fact that advertisers and Web portals have over the years settled on a payment method that is beneficial to one another is conducive to portal growth as well, Liu suggested.
Some analysts have pointed out that, in the past, most Internet advertisers tended to be Internet operators themselves. Now, traditional businesses like banks, food retailers and manufacturers of daily necessities have begun to budget more of their advertisement dollar for the virtual marketplace and away from brick-and-mortar operations.
Another crucial factor to a prosperous Internet portal is fee-based services. Many have questioned whether regular users of the Internet would be willing to pay for services that are currently free, such as e-mail, newsletters and online chatting. "Consumers will definitely resist in the beginning," Liu opined, "But the more they depend on a particular service, perhaps the more willing they will be to pay for it." While industry stakeholders agree that the attitude of the average user has been changing, no one seems willing to rush into charging money for services that, at this point, are widely available for free. Even online auctions, whose popularity in Taiwan has soared in the past year alone, are unlikely to become subscription-based services anytime soon.
Sites such as eBay and Yahoo!Taiwan, which already make money on each transaction they host, have been hesitant to supplement that income by charging people a fee. "I think the important thing should be to provide better, value-added services to attract consumers--to know what they want and make them willing to pay for what they can get," Tseng said.
PC Home Online offers fee-based services like newsletters and online data storage. It recently added online credit-information requests to the list. Tseng noted that information about a company's credit history is a more advanced service, for which consumers should expect to pay.
"Of course, for more basic services like e-mail, portals should keep them free. This is necessary to maintain the size of our online marketplace," she said. Conversely, there is no reason service providers must shoulder the cost of high-capacity Web storage, she added.
But portals have also sought other means to grab attention. While Yahoo!Taiwan runs a successful auction site, PC Home is known for its online shopping, especially for consumer electronics, communications products and computers. Yam Digital, on the other hand, manages and distributes software-based services and solutions to its customers, and helps local industries establish online networks.
Yam Digital's Wang noted that the company has also devoted much effort to managing specific Web sites for children, women and sports fans, the contents of which are all produced in-house.
Having confidence in the local operator's ability to run thematic Web sites, the National Basketball Association in the United States recently granted Yam Digital exclusive Taiwan distribution rights to its Web content.
Portals in Taiwan have grown from being simple search engines to information pools, Liu said. "You go to a portal and everything is there--it can lead you to updated financial information, entertainment and virtual shopping malls. It is a one-stop shop," she enthused. The project manager added that, for older people who may not be as adept at using computers as the younger generation, such one-stop shopping is an attractive, less intimidating way to connect to the Internet.
However, for researchers and analysts like Liu herself, powerful search engines such as Google are also irreplaceable. "The chances for success are greater if you either specialize in the area you know best or if you diversify. Web portals just need to have a clear idea of what they want to become." When Yahoo!Taiwan celebrated its second anniversary early this month, General Manager Rose Tsou said she hopes to turn the Web site into an "Internet-life essential"--an indispensable virtual destination, whether at work or at home. So far, most of the portal operators seem to be trying to achieve a similar result. As they report more stable growth, they are increasingly confident that they have chosen the right path.
A few short years ago, the future seemed bleak for dot-com businesses. Companies that had been riding the wave of the information revolution went bust overnight. Even those that survived the dot-com bust have had to struggle to get out of the red. Early this year, Taiwan's major Web portals reported significant growth in sales--something industry watchers say could be heralding a better future for dot-coms.
Yahoo!Taiwan--a 2001 merger of Yahoo! Inc.'s Taiwan Web presence and an operation called Kimo--began reporting profits in the third quarter of last year. Currently the largest Internet portal in Taiwan, Yahoo!Taiwan recently reported third-quarter revenues of US$10.5 million, a 28-percent increase over the previous quarter. Revenues from advertising--which also saw a 23-percent surge--accounted for 69 percent of total earnings. According to company sources, the number of unique hits, or non-repeat visitors, on its portal in August reached 9.28 million. Users spent an average of 426 minutes a month on the site. These are strong numbers.
Other companies, though they have a smaller share of the market, have managed to break even. PC Home Online, Taiwan's second-largest Internet portal, saw its revenue reach US$17.9 million in the first half of this year, an increase of 213 percent from the same period last year, according to market manager Vicky Tseng. "We were still in the red last year, but so far this year, we have been able to make profits every month." Equally buoyant is the team at Yam Digital Technology, one of the oldest portals in Taiwan. Ily Wang, assistant manager of public relations, said the company expects to see its after-tax profits hit US$1 million. Advertising revenue is expected to grow by at least 70 percent.
"We indeed have reason to be optimistic about the future of dot-com businesses," said Liu Fang-mei, a project manager at Institute for Information Industry's Focus on Internet News and Data research group. "The industry has been growing continuously despite the darker days of two years ago, when people's enthusiasm for investing in Internet stocks suddenly went cold." With all the recent hype surrounding portal profitability, headlines have announced that the dot-com business is heading for another golden age. Tseng, however, characterized such proclamations as erroneous, saying that the previous dot-com bubble resulted from people's false expectations of the new medium. "Vendors and users expected too much, too fast," she said. People's understanding of the golden days was reflected in the soaring stock prices, rather than the positive interaction made possible between the new technology and humanity, Tseng explained.
"The Internet industry has never really taken off," she stressed. "Dot-com growth is always there. In fact, we are still in preliminary development." The latest report of a boom seems only natural. "As the years have gone by, companies have settled on viable business models and the Internet has become an essential part of most people's lives. All this has led to a dynamic development of the industry," she said.
By the end of June, the number of people with Internet access in Taiwan--meaning those having active registered accounts with service providers--reached 8.76 million. The figure for broadband subscribers stands at 2.45 million.
Analysts believe that the general business community is more willing to invest in Internet stocks than it was after the dot-com crash. Advertisers are indicative of this trend. "More and more business executives began vying for the attention of young people. While there are many types of media through which companies can gain exposure, the Internet is nevertheless the best choice if you want to reach out to the younger demographic," Liu said.
Internet advertising methods have evolved since the days of old-fashioned banner ads. Programming advances allow companies to market their wares with flash animations, pop-up windows and an array of ever more creative schemes to develop what marketing experts call mind share, which is the degree to which their brand is easily remembered by a target consumer group.
Thanks to new technology, advertisers can interact with users more directly and reach their target consumers more easily. The fact that advertisers and Web portals have over the years settled on a payment method that is beneficial to one another is conducive to portal growth as well, Liu suggested.
Some analysts have pointed out that, in the past, most Internet advertisers tended to be Internet operators themselves. Now, traditional businesses like banks, food retailers and manufacturers of daily necessities have begun to budget more of their advertisement dollar for the virtual marketplace and away from brick-and-mortar operations.
Another crucial factor to a prosperous Internet portal is fee-based services. Many have questioned whether regular users of the Internet would be willing to pay for services that are currently free, such as e-mail, newsletters and online chatting. "Consumers will definitely resist in the beginning," Liu opined, "But the more they depend on a particular service, perhaps the more willing they will be to pay for it." While industry stakeholders agree that the attitude of the average user has been changing, no one seems willing to rush into charging money for services that, at this point, are widely available for free. Even online auctions, whose popularity in Taiwan has soared in the past year alone, are unlikely to become subscription-based services anytime soon.
Sites such as eBay and Yahoo!Taiwan, which already make money on each transaction they host, have been hesitant to supplement that income by charging people a fee. "I think the important thing should be to provide better, value-added services to attract consumers--to know what they want and make them willing to pay for what they can get," Tseng said.
PC Home Online offers fee-based services like newsletters and online data storage. It recently added online credit-information requests to the list. Tseng noted that information about a company's credit history is a more advanced service, for which consumers should expect to pay.
"Of course, for more basic services like e-mail, portals should keep them free. This is necessary to maintain the size of our online marketplace," she said. Conversely, there is no reason service providers must shoulder the cost of high-capacity Web storage, she added.
But portals have also sought other means to grab attention. While Yahoo!Taiwan runs a successful auction site, PC Home is known for its online shopping, especially for consumer electronics, communications products and computers. Yam Digital, on the other hand, manages and distributes software-based services and solutions to its customers, and helps local industries establish online networks.
Yam Digital's Wang noted that the company has also devoted much effort to managing specific Web sites for children, women and sports fans, the contents of which are all produced in-house.
Having confidence in the local operator's ability to run thematic Web sites, the National Basketball Association in the United States recently granted Yam Digital exclusive Taiwan distribution rights to its Web content.
Portals in Taiwan have grown from being simple search engines to information pools, Liu said. "You go to a portal and everything is there--it can lead you to updated financial information, entertainment and virtual shopping malls. It is a one-stop shop," she enthused. The project manager added that, for older people who may not be as adept at using computers as the younger generation, such one-stop shopping is an attractive, less intimidating way to connect to the Internet.
However, for researchers and analysts like Liu herself, powerful search engines such as Google are also irreplaceable. "The chances for success are greater if you either specialize in the area you know best or if you diversify. Web portals just need to have a clear idea of what they want to become." When Yahoo!Taiwan celebrated its second anniversary early this month, General Manager Rose Tsou said she hopes to turn the Web site into an "Internet-life essential"--an indispensable virtual destination, whether at work or at home. So far, most of the portal operators seem to be trying to achieve a similar result. As they report more stable growth, they are increasingly confident that they have chosen the right path.
Navio Content Commerce System Launched
Navio, a new content commerce company based on person-to-person transactions, has been launched (For those of you who have been following the vendor section on this site, the company was tentatively named Aplaud before its launch, which I think is a better name).
The company, out of Cupertino, CA, has been formed by Stefan Roever, co-founder of German company Brokat Technologies. It is venture backed by London-based VC firms Ariadne Capital and Add Partners.
I was given a presentation about the company a couple of months ago, by its marketing head Bill Barhydt, and it is trying out an interesting yet difficult model: trying to enable viral selling of content, at its heart.
The company's technology aims to combine identity management, content packaging and payment functions. It is doing this through what a digital locker it calls "Navio Companion". The first service is aimed mainly at the mobile users.
The company is working with some big name clients in the mobile/entertainment/music space, on a trial basis, and it would be interesting to follow the company's trajectory.
The company, out of Cupertino, CA, has been formed by Stefan Roever, co-founder of German company Brokat Technologies. It is venture backed by London-based VC firms Ariadne Capital and Add Partners.
I was given a presentation about the company a couple of months ago, by its marketing head Bill Barhydt, and it is trying out an interesting yet difficult model: trying to enable viral selling of content, at its heart.
The company's technology aims to combine identity management, content packaging and payment functions. It is doing this through what a digital locker it calls "Navio Companion". The first service is aimed mainly at the mobile users.
The company is working with some big name clients in the mobile/entertainment/music space, on a trial basis, and it would be interesting to follow the company's trajectory.
Wednesday
Online advertising 'to click again'
Online advertising is finally about to climb out of its three-year slump, according to a report by accountants PriceWaterhouseCoopers (PWC).
The report says that internet advertising in Western Europe will see double-digit growth this year, thanks mainly to paid-for-listings placed through search engines and the overall growth in internet use.
High-profile sporting events such as the Athens Olympics in 2004 and the football World Cup in Germany in 2006 should sustain the upturn over the next four years, PWC predicts.
Online advertising went into meltdown after the dotcom bubble burst in 2000.
But this year should see growth of 10.6% in online advertising in the UK, France, Italy, Germany, Spain and Holland, taking income in the six countries to 886m euros ($1.03bn, ?617m).
As broadband develops it will offer different types of online advertising that are not available at present Paul Pilkington, PriceWaterhouseCoopers
According to Paul Pilkington, senior manager at PWC, it is the use by the internet's big search engines of search-result placement fees which is making the difference.
The leading company running this type of advertising is Overture, which auctions to the highest bidder the top position on searches for given words or phrases.
The company has now been bought by search giant Yahoo, whose shares have risen to a 33-month high on the back of improved US online advertising revenues.
Mr Pilkington said: "This has been a huge growth sector, paying for your keywords to appear highest in a search engine listing.
"This has really taken off, with companies paying for their name to be placed in a premium position for search engine results."
By 2007, advertisers will spend more than 1.25bn euros in Web advertising across the Western Europe region, the PWC study says. It believes strong demand for high-speed internet broadband services will boost the market for online access and internet advertising spending to 18.1bn euros, a 7.4 % gain over the 2003-2007 period.
Although a growth in advertising usually indicates better economic times, Mr Pilkington warned the upturn in online advertising could not be used as a gauge of the mainstream advertising market, or wider European economy.
The report says that internet advertising in Western Europe will see double-digit growth this year, thanks mainly to paid-for-listings placed through search engines and the overall growth in internet use.
High-profile sporting events such as the Athens Olympics in 2004 and the football World Cup in Germany in 2006 should sustain the upturn over the next four years, PWC predicts.
Online advertising went into meltdown after the dotcom bubble burst in 2000.
But this year should see growth of 10.6% in online advertising in the UK, France, Italy, Germany, Spain and Holland, taking income in the six countries to 886m euros ($1.03bn, ?617m).
As broadband develops it will offer different types of online advertising that are not available at present Paul Pilkington, PriceWaterhouseCoopers
According to Paul Pilkington, senior manager at PWC, it is the use by the internet's big search engines of search-result placement fees which is making the difference.
The leading company running this type of advertising is Overture, which auctions to the highest bidder the top position on searches for given words or phrases.
The company has now been bought by search giant Yahoo, whose shares have risen to a 33-month high on the back of improved US online advertising revenues.
Mr Pilkington said: "This has been a huge growth sector, paying for your keywords to appear highest in a search engine listing.
"This has really taken off, with companies paying for their name to be placed in a premium position for search engine results."
Television-style ads
He also said an increase in internet users was helping to boost advertising.By 2007, advertisers will spend more than 1.25bn euros in Web advertising across the Western Europe region, the PWC study says. It believes strong demand for high-speed internet broadband services will boost the market for online access and internet advertising spending to 18.1bn euros, a 7.4 % gain over the 2003-2007 period.
The spread of broadband will enable advertisers to move towards more TV-style advertising, Mr Pilkington said.
Although a growth in advertising usually indicates better economic times, Mr Pilkington warned the upturn in online advertising could not be used as a gauge of the mainstream advertising market, or wider European economy.
Extending Your Reach
Fragmentation of media consumption is at an all-time high, so using online in conjunction with traditional media can help reach people who are light users of the other mediums.
If you’ve worked for any spell at all in advertising, you have no doubt encountered a pattern of words, phrases, formulae and not a few platitudes that pertain to the industry. Their use identifies one as an insider, even if those making the utterances have no idea what they are talking about.
The word that stands out most among the fray of cabalistic turns of the phrase is “reach.”
What is nice about ‘reach’ when applied as a technical term in advertising is that is means exactly what it does in layman’s use, with the biggest difference perhaps being that often times there is a percentage associated with it when used as a technical advertising term.
Reach is the big, bad, and most often all-important communication delivery variable when considering different advertising programs. A large reach figure translates into a large number of persons touched by one’s messaging. Somewhere along the marketing chain of analysis, this figure can be converted into some number of widgets sold. Hence the importance of the figure and why advertisers work so hard to make it so big.
In the days of old, the electronic medium best suited to accomplishing the task of creating ‘reach’ was that of television. An advertiser could put a commercial on All In The Family and have talked to some 40% of the total television viewing population.
These days, seven million households can constitute a major success in television programming and draw advertisers like an ice cream truck does children.
But television has a lot more to compete with these days, not only with other media, but with itself al well. Plenty of people still watch television with regularity, but they are found all over the spectrum now. The rich mosaic of cable television and niche programming has made it such that only slivers of audience, albeit still significant overall, can be found at any one time in any one place.
And lest ye forget those who have no regular viewing pattern but are important to a brand successfully impacting its bottom line. What about those who are not regular enough television views to be impacted by television advertising?
How big can an advertiser get its reach in the current environment?
There is a limit to how big the number can be made given a fixed budget and a fractious media landscape.
Consumers have more media choices available to them than they ever did before. Fragmentation of media consumption is at an all-time high, making it tougher for marketers who have traditionally used television to extend reach to their key target audiences. But using online in conjunction with traditional media can help to reach those people who are light consumers of TV and other traditional media.
The evidence is present for all to see who are willing to open their eyes and look. In the last two years, the IAB has done the most to tell the world about what kind of impact online media can have on the communication delivery of an advertising campaign.
With the first XMOS report (Cross-Media Optimization Study) done in cooperation with MSN, Marketing Evolution, The ARF, and Dynamic Logic partnering with Forrester which showed the incremental lift in traditional branding metrics yielded by slight shifts in spending away from television and into online, the IAB has led the way in making the case for the Web deserving a seat at the media mix table. This first study was done for Dove’s Nutrium Bar, and it showed that by taking a very small number of dollars earmarked for television and redistributing it towards online, an advertiser could affect its overall brand metrics in the affirmative by a combined 8% (from both a lift in reach and frequency in online).
This is achievable by taking money out of television that does not negatively impact the medium’s reach, but rather takes the average frequency down from 6.0 to 5.5. This essentially means that by lowering the average number of times a heavy television viewer sees an ad, brand metrics can be raised without changing the overall amount of spend in an advertising budget.
The reason this is important to note is because of the very thing discussed at the beginning. Due to more channels of distribution available for televised content (i.e. more networks, programming, etc.), an advertiser is contending with a more diluted communication vehicle by which to reach a member of the target audience. This is not so important when the entirety of an advertiser’s audience is to be found among the heaviest of television watchers; the advertiser can be assured that at some point its intended will eventually be exposed to the message in one of a multitude of broadcast vehicles.
But what of the less enthusiastic television viewer? How does an advertiser extend its reach to those beyond the pale of primetime TV?
The IAB XMOS reports show time and again that by making a modest adjustment to the advertising budget that is destined for traditional media, and most commonly, television, advertisers can extend their reach to those persons not readily available in the television audience.
The reason for this is because at any given point in time, a segment of a target audience is NOT watching TV or reading a magazine when the advertiser has guessed that they would be. Again, this is due to there being so many other things to do and so many other media to engage on the part of the individuals who make up this audience.
In March of this year, DoubleClick released a study done in concert with Nielsen//NetRatings and IMS that demonstrated this phenomenon.
This study showed that online media can contribute gross reach, in the form of GRPs (gross rating points) to advertising campaigns and is especially efficient at extending reach into audiences that rarely watch television. As each ratings point can potentially translate into more than one million consumers, even slight shifts in reach can greatly impact the effectiveness of a media plan. Something to note, however, is that if an advertiser is interested in a specific audience, and not just any audience, the impact on TRPs (targeted rating points) can even be more significant.
With current media fragmentation, TRPs (targeted audience points) are a better way to assess media. “GRPs do not show the tendency for campaigns that primarily use television to overreach (achieve very high frequencies) those who watch television often, while under-reaching (achieving less than optimal frequency) those who rarely watch television,” states the study. As more rarified members of a target audience—for example professionals, teens or working women—are spending less time watching TV and more time online, they cannot be efficiently reached through television alone.
The XMOS done for Kimberly-Clark’s Kleenex brand early this year demonstrated what is meant here.
The company allocated 75% of its overall advertising dollars to television, 23% to print, and 2% to online. After analyzing each medium’s effectiveness in boosting aided brand awareness, brand image, purchase intent, and bundled trial intent, the company found that online works in tandem with offline advertising to deliver 42% of the audience that is only lightly reached -- or not reached at all -- by television.
What those coming to any of this information should keep in mind, however, is that when all is said and done, it isn’t about the amount of money that is necessary to extend reach. It is what kind of media is necessary and how much of that media is necessary.
Many of the studies that discuss reallocation of spending to online make the mistake of focusing on just that: spending.
"Online should get 15% of a budget," or "the percentage of spending should be based on what percentage of an audience is spending its time with the given medium."
The reason for this is, in large part, because clients often times speak in this way. More times than I care to remember, they pose their query as one of a matter of dollars. I can appreciate that, since brand managers and marketing managers have bosses who frequently refer to their allocations in terms of percentages of a total budget.
But this doesn’t really make sense. It is like the Hindu myth that says the world is upheld by four elephants standing on the back of a tortoise. When asked what the tortoise is standing on, one is forced to answer “it is tortoises all the way down.”
When putting together a media plan, it is the communication delivery goals that dictate which media are to be used and how much each medium should be used. These communication delivery goals are based on historical, or projective, cause-and-effect relationships between the amount of inventory that runs in a given medium and the results that medium can yield. Basically, a certain level of media weight results in some satisfaction of a business goal. The basis for a TRP (targeted rating point) goal is an estimate of some number of TRPs resulting in some quantifiable movement towards the achievement of a predetermined business goal.
But this quantifiable movement is based on how much communication is necessary, or how much “reach” need be extended through which media. The dollars allocated towards a given medium to purchase the necessary amount of inventory to make this happen is what becomes the spending per medium.
If as the media planner on a campaign I've decided that TV, Print, and Online are the media being used, and upon further examination, have found that the weight levels necessary for each medium in order to accomplish my client's goals are 1/3, 1/3, and 1/3, then my media weight distribution -- in this instance, let us call them impressions -- is even among each media. This means TV gets 33% of media weight; Print gets 33%, and Online gets 33%. But if TV costs are twice as great as Print’s, and Print costs are twice as much as Online’s, then my budget allocations are 57% for TV, 29% for Print, and 14% for Online.
What is indisputable is that in many cases, no one medium can get the job done by itself. The use of multiple media is paramount in effectively extending reach to as many potential customers as possible. As peoples in motion, constantly looking for the next media high while engaging our regular favorites only to watch them become media lows, advertisers need to move quickly and in the same environments. Online is one of those environments.
If you’ve worked for any spell at all in advertising, you have no doubt encountered a pattern of words, phrases, formulae and not a few platitudes that pertain to the industry. Their use identifies one as an insider, even if those making the utterances have no idea what they are talking about.
The word that stands out most among the fray of cabalistic turns of the phrase is “reach.”
What is nice about ‘reach’ when applied as a technical term in advertising is that is means exactly what it does in layman’s use, with the biggest difference perhaps being that often times there is a percentage associated with it when used as a technical advertising term.
Reach is the big, bad, and most often all-important communication delivery variable when considering different advertising programs. A large reach figure translates into a large number of persons touched by one’s messaging. Somewhere along the marketing chain of analysis, this figure can be converted into some number of widgets sold. Hence the importance of the figure and why advertisers work so hard to make it so big.
In the days of old, the electronic medium best suited to accomplishing the task of creating ‘reach’ was that of television. An advertiser could put a commercial on All In The Family and have talked to some 40% of the total television viewing population.
These days, seven million households can constitute a major success in television programming and draw advertisers like an ice cream truck does children.
But television has a lot more to compete with these days, not only with other media, but with itself al well. Plenty of people still watch television with regularity, but they are found all over the spectrum now. The rich mosaic of cable television and niche programming has made it such that only slivers of audience, albeit still significant overall, can be found at any one time in any one place.
And lest ye forget those who have no regular viewing pattern but are important to a brand successfully impacting its bottom line. What about those who are not regular enough television views to be impacted by television advertising?
How big can an advertiser get its reach in the current environment?
There is a limit to how big the number can be made given a fixed budget and a fractious media landscape.
Consumers have more media choices available to them than they ever did before. Fragmentation of media consumption is at an all-time high, making it tougher for marketers who have traditionally used television to extend reach to their key target audiences. But using online in conjunction with traditional media can help to reach those people who are light consumers of TV and other traditional media.
The evidence is present for all to see who are willing to open their eyes and look. In the last two years, the IAB has done the most to tell the world about what kind of impact online media can have on the communication delivery of an advertising campaign.
With the first XMOS report (Cross-Media Optimization Study) done in cooperation with MSN, Marketing Evolution, The ARF, and Dynamic Logic partnering with Forrester which showed the incremental lift in traditional branding metrics yielded by slight shifts in spending away from television and into online, the IAB has led the way in making the case for the Web deserving a seat at the media mix table. This first study was done for Dove’s Nutrium Bar, and it showed that by taking a very small number of dollars earmarked for television and redistributing it towards online, an advertiser could affect its overall brand metrics in the affirmative by a combined 8% (from both a lift in reach and frequency in online).
This is achievable by taking money out of television that does not negatively impact the medium’s reach, but rather takes the average frequency down from 6.0 to 5.5. This essentially means that by lowering the average number of times a heavy television viewer sees an ad, brand metrics can be raised without changing the overall amount of spend in an advertising budget.
The reason this is important to note is because of the very thing discussed at the beginning. Due to more channels of distribution available for televised content (i.e. more networks, programming, etc.), an advertiser is contending with a more diluted communication vehicle by which to reach a member of the target audience. This is not so important when the entirety of an advertiser’s audience is to be found among the heaviest of television watchers; the advertiser can be assured that at some point its intended will eventually be exposed to the message in one of a multitude of broadcast vehicles.
But what of the less enthusiastic television viewer? How does an advertiser extend its reach to those beyond the pale of primetime TV?
The IAB XMOS reports show time and again that by making a modest adjustment to the advertising budget that is destined for traditional media, and most commonly, television, advertisers can extend their reach to those persons not readily available in the television audience.
The reason for this is because at any given point in time, a segment of a target audience is NOT watching TV or reading a magazine when the advertiser has guessed that they would be. Again, this is due to there being so many other things to do and so many other media to engage on the part of the individuals who make up this audience.
In March of this year, DoubleClick released a study done in concert with Nielsen//NetRatings and IMS that demonstrated this phenomenon.
This study showed that online media can contribute gross reach, in the form of GRPs (gross rating points) to advertising campaigns and is especially efficient at extending reach into audiences that rarely watch television. As each ratings point can potentially translate into more than one million consumers, even slight shifts in reach can greatly impact the effectiveness of a media plan. Something to note, however, is that if an advertiser is interested in a specific audience, and not just any audience, the impact on TRPs (targeted rating points) can even be more significant.
With current media fragmentation, TRPs (targeted audience points) are a better way to assess media. “GRPs do not show the tendency for campaigns that primarily use television to overreach (achieve very high frequencies) those who watch television often, while under-reaching (achieving less than optimal frequency) those who rarely watch television,” states the study. As more rarified members of a target audience—for example professionals, teens or working women—are spending less time watching TV and more time online, they cannot be efficiently reached through television alone.
The XMOS done for Kimberly-Clark’s Kleenex brand early this year demonstrated what is meant here.
The company allocated 75% of its overall advertising dollars to television, 23% to print, and 2% to online. After analyzing each medium’s effectiveness in boosting aided brand awareness, brand image, purchase intent, and bundled trial intent, the company found that online works in tandem with offline advertising to deliver 42% of the audience that is only lightly reached -- or not reached at all -- by television.
What those coming to any of this information should keep in mind, however, is that when all is said and done, it isn’t about the amount of money that is necessary to extend reach. It is what kind of media is necessary and how much of that media is necessary.
Many of the studies that discuss reallocation of spending to online make the mistake of focusing on just that: spending.
"Online should get 15% of a budget," or "the percentage of spending should be based on what percentage of an audience is spending its time with the given medium."
The reason for this is, in large part, because clients often times speak in this way. More times than I care to remember, they pose their query as one of a matter of dollars. I can appreciate that, since brand managers and marketing managers have bosses who frequently refer to their allocations in terms of percentages of a total budget.
But this doesn’t really make sense. It is like the Hindu myth that says the world is upheld by four elephants standing on the back of a tortoise. When asked what the tortoise is standing on, one is forced to answer “it is tortoises all the way down.”
When putting together a media plan, it is the communication delivery goals that dictate which media are to be used and how much each medium should be used. These communication delivery goals are based on historical, or projective, cause-and-effect relationships between the amount of inventory that runs in a given medium and the results that medium can yield. Basically, a certain level of media weight results in some satisfaction of a business goal. The basis for a TRP (targeted rating point) goal is an estimate of some number of TRPs resulting in some quantifiable movement towards the achievement of a predetermined business goal.
But this quantifiable movement is based on how much communication is necessary, or how much “reach” need be extended through which media. The dollars allocated towards a given medium to purchase the necessary amount of inventory to make this happen is what becomes the spending per medium.
If as the media planner on a campaign I've decided that TV, Print, and Online are the media being used, and upon further examination, have found that the weight levels necessary for each medium in order to accomplish my client's goals are 1/3, 1/3, and 1/3, then my media weight distribution -- in this instance, let us call them impressions -- is even among each media. This means TV gets 33% of media weight; Print gets 33%, and Online gets 33%. But if TV costs are twice as great as Print’s, and Print costs are twice as much as Online’s, then my budget allocations are 57% for TV, 29% for Print, and 14% for Online.
What is indisputable is that in many cases, no one medium can get the job done by itself. The use of multiple media is paramount in effectively extending reach to as many potential customers as possible. As peoples in motion, constantly looking for the next media high while engaging our regular favorites only to watch them become media lows, advertisers need to move quickly and in the same environments. Online is one of those environments.
Tuesday
One million iTunes for Windows
iTunes for Windows has been downloaded over a milion times since its launch on Thursday, Apple announced today.
And in the same period over one million songs have been sold on the iTunes Music Store, double the rate of sales achieved when the service first launched at the end of April.
This brings the total sold to 14 million, an average of more than half a million each week.
'We're off to a great start,' said Apple CEO Steve Jobs, 'and our competition isn't even out of the starting gates yet.'
Let's hope that he now turns his attention to opening the store to Europe and the rest of the world.
And in the same period over one million songs have been sold on the iTunes Music Store, double the rate of sales achieved when the service first launched at the end of April.
This brings the total sold to 14 million, an average of more than half a million each week.
'We're off to a great start,' said Apple CEO Steve Jobs, 'and our competition isn't even out of the starting gates yet.'
Let's hope that he now turns his attention to opening the store to Europe and the rest of the world.
Free to be Fee
Is advertising getting squeezed out by consumers' new willingness to pay for their fun? Veronis Suhler Stevenson caused some tremors last summer when it argued that U.S. eyeballs and eardrums are spending progressively less time with ad-supported media (57.8 percent) and more time with fee-based content, which they define as movies and video rentals, cable TV, and the Internet. As consumers get accustomed to paying more of the freight for their media experiences, so go the nightmare scenarios, advertisers have fewer places to pitch them.
Don't worry. It was only a nightmare. Why VSS included the Internet among its consumer-supported categories is anyone's guess, given Webizens' famous resistance to paying for online content. To be sure, in the post-bubble world where the "free ride" is supposedly over, onliners are expected to pay up to $2 billion for content in 2003, according to Jupiter Research. Some providers like Weatherbug, Salon.com, and Britannica.com promote their fee-based products specifically as ad-free environments. Nevertheless, in the foreseeable future, ad spending will continue to dwarf consumer fees, which have grown at a good but not barn-busting pace of 20 percent to 30 percent annually. "Paid content is probably inching up on 15 percent to 20 percent of the total size of the ad market," says Michael Zimbalist, executive director, Online Publishers Association. "The question really is going to be recognizing the point of equilibrium. We're still in a state where that is sorting itself out." More than equilibrium, important synergies between free and fee-based models are starting to emerge at some of the very sites that enjoy strong subscription growth. Fee-based programs are helping some providers like Weatherbug underwrite new technologies for the ad-supported services. The innovative new ad provider Ultramercial (www.ultra-mercial.com) is helping companies like Salon.com develop a model that trades premium content for consumers' eyeball time. At least one publisher that has spent years behind the subscription wall, WSJ.com, is demonstrating that paying customers may actually be the best audiences for advertisers. Far from mutually exclusive, fee and free may actually work better together on the Web than they do in other media.
More important, having a diversified revenue model actually helped fund more sophisticated ad approaches like WeatherBug's innovative "Select a Sponsor" program, where new users actually pick which ad client appears on their pop-up weather utility for the first week. It all started with a dare from an unwilling client. Jedynak recalls. "He said, ‘I will buy from you if I pay only for the people who say they want to see my ad,' and we took that seriously." The product took five months and more than $100,000 to develop, but he thinks that having reliable subscriber revenue allowed the company the necessary time and resources. "It gave us the revenue stream to develop additional ad solutions," he notes.
Indeed, once users acknowledge the value of online media, they actually seem willing to give a sponsor even more of their undivided attention. To wit — the new hot thing among major media brands and some ad clients is the "sponsored day pass." First seen at Salon.com and invented by California-based Ultramercial, this model lets non-subscribers access the paid areas in exchange for viewing an extended multimedia ad for a single sponsor. "You can't click away from the ad," says Micheal O'Donnell, CEO and president, Salon. "That is our Pavlovian attitude — if you want the food, you have to watch the ad."
And apparently the puppies are staying and salivating. Ultramercials can run up to 30 seconds and include sequenced pages of creative. Nevertheless, according to the company's metrics, 93.5 percent of Salon visitors who initiate the day pass watch the entire ad and spend on average 52 seconds with it, often including interactions with the brand. The format has attracted top-tier clients such as Absolut, Mercedes-Benz, American Express, and even advocacy ads for the ACLU.
The principle here is much the same as offline, says Jonathan Levin, CEO and founder eMeta, which provides the software for paid areas at NYTimes.com, FT.com, and Hoovers.com. In the real world of print, free publications generally command lower ad fees, while paid and controlled circulation books enjoy the better ad rates. "You need to value your content," he says. "If you don't, no one else will." Oddly enough in Salon's case, the fact that users have the day pass alternative to buying a full subscription to the premium site seems to have helped rather than hindered expansion of the paid base. Salon was relatively stagnant at about 45,000 paying customers when the program started nine months ago, but now has ballooned to nearly 75,000. "For a publication, this is like defying gravity," says Jones.
And because the audience is essentially captive during the spot, the advertiser knows precisely how many people truly sat through their ad, a metric virtually no other medium can promise a client. Ultramercial says it started receiving calls from publishers and ad clients on the day the format first appeared on Salon. It has already pushed Virgin Mobile ads at eMode and IGN.com, and is working in stealth mode with a number of "major media conglomerates" to deploy the day pass at some of the Web's most visible content properties later this year.
Because of this inevitable user flight at the first glimpse of a sub wall, most publishers have to make a hard choice and do a tough cost/benefit analysis when they move to a paid model. With low-urgency content that is more nice-to-have than must-have, publishers can expect to convert as little as 2 percent of their uniques to paying customers, and virtually gut their advertising reach, says Levin. "There is a trade-off that doesn't exist in print," he says. Accordingly, many publishers start by walling off only a fraction of their content in order to maintain enough raw reach to sell to ad clients.
But keeping ads out of paid areas is not necessarily a long-range plan for content providers, says Zimbalist. "Early on, people were saying ‘free with ads' or ‘pay with no ads,' and I always believed that was a very shortsighted way to market. The either/or model wouldn't be in the best interest of the publishers."
In fact, if advertisers and publishers can change their thinking a bit about online audiences, metrics, and ad effectiveness, they might see that paid subscribers constitute the most receptive and reliable audiences for marketers. One of the oldest and most successful of fee-based publishers, Dow Jones, offers a glimpse of hybrid models to come. Along with FT.com, Janes.com, and SoftwareCEO.com, it is among the only paid sites to place advertising on both sides of the sub wall, at free sites like CareerJournal.com, StartupJournal.com, and OpinionJournal.com, and into the 671,000 paid members at WSJ.com. Dow Jones sells ads across the free/fee network, and doesn't specify WSJ.com as a discrete placement, yet the more highly targeted ad buys generally are going into this area, where the company has much more detailed demo profiles and behavioral data.
"By having the subscription model from the beginning, it's allowed us to command a higher CPM because clearly, people want to know what we know about our user," says Randy Kilgore, VP advertising. Open rates for "run of network" ads go for a CPM of $35.Kilgore's "special sauce" of demographic targeting costs $95 to do tricks like aiming for senior level managers of companies with 100,000 employees, and much of this audience is behind the sub wall. As a result, "we believe we generate a similar amount of advertising revenue as sites that have far greater apparent reach," says Todd Larsen, president, consumer electronics publishing, Dow Jones. The company has also turned around the denser sets of behavioral data that a subscriber base allows into a very hot "Interest-Based Targeting" product. By knowing a user's reading habits, Kilgore and company can sell an auto maker all of the WSJ.com members who recently used the car loan calculator and are therefore, clearly in-market. "We've got a bunch of folks already committed," he says. "It seems to be the topic of every sales call."
A paid model pays off for advertisers in a number of other more subtle ways than sheer targeting. Acknowledging that users are paying their way, WSJ.com is more discriminating in the size, number, and placement of its ads, says Larsen. "But that has turned into a real sales benefit. [Clients] want to be in an environment that is less cluttered."
And a number of others in the industry are arguing now that paying customers simply make better audiences for advertisers. "Subscribers have high loyalty to a content brand," says Zimbalist. An OPA study earlier this year found that familiar ad metrics such as aided brand awareness, message association, and brand favorability ran higher among sites with faithful audiences. "It suggests that content loyalty translates into advertiser effectiveness."
No doubt, publishers will have ample opportunity to prove this case with agencies and clients. According to Levin, eMeta's pipeline of companies that are moving at least some of their material to a subscription model is larger than ever. Nevertheless, in the end, few publishers believe that a subscription business will successfully supplant ad models. O'Donnell expects that the 50 percent of Salon revenue now coming from ads will eventually grow again, and Larsen believes WSJ.com's ad revenues will become much more important to the mix in coming years. Nevertheless, advertisers certainly will be buying into more hybrid networks of fee and free audiences in the near future, which could challenge longstanding conventions about online reach and frequency.
Where the subscription model succeeds, advertisers may also be dealing with a new balance of power. Publishers with a reliable, alternative revenue stream tend to be less desperate and less pliant with clients. In the post-bubble years when many sites were only one lost ad sale away from shutting down, they came to the table with fear in their eyes and a willingness to try just about anything. A healthy subscriber income can change everything, however. "In a candid moment, other site managers and even ad directors would say they have done things they wouldn't have wanted to do," says Kilgore. "We're able to say no."
No. It's been a good three or four years since a media buyer heard that response from a website.
Don't worry. It was only a nightmare. Why VSS included the Internet among its consumer-supported categories is anyone's guess, given Webizens' famous resistance to paying for online content. To be sure, in the post-bubble world where the "free ride" is supposedly over, onliners are expected to pay up to $2 billion for content in 2003, according to Jupiter Research. Some providers like Weatherbug, Salon.com, and Britannica.com promote their fee-based products specifically as ad-free environments. Nevertheless, in the foreseeable future, ad spending will continue to dwarf consumer fees, which have grown at a good but not barn-busting pace of 20 percent to 30 percent annually. "Paid content is probably inching up on 15 percent to 20 percent of the total size of the ad market," says Michael Zimbalist, executive director, Online Publishers Association. "The question really is going to be recognizing the point of equilibrium. We're still in a state where that is sorting itself out." More than equilibrium, important synergies between free and fee-based models are starting to emerge at some of the very sites that enjoy strong subscription growth. Fee-based programs are helping some providers like Weatherbug underwrite new technologies for the ad-supported services. The innovative new ad provider Ultramercial (www.ultra-mercial.com) is helping companies like Salon.com develop a model that trades premium content for consumers' eyeball time. At least one publisher that has spent years behind the subscription wall, WSJ.com, is demonstrating that paying customers may actually be the best audiences for advertisers. Far from mutually exclusive, fee and free may actually work better together on the Web than they do in other media.
User-Funded Advertising
While a hearty 120,000 meteorological nuts pay $19.95 for an enhanced and ad-free version of the famous WeatherBug desktop utility, "that's relatively negligible compared to our 25 million free subscribers," says SVP and general manager Andy Jedynak. The company's revenue jumped 113 percent in the first half of 2003, but less than 10 percent of it is coming from consumer fees, and the roster of advertisers grew from 120 to 167. But since paid subscribers obviously are the most devoted visitors to a site, and perhaps the most interested in the core topic, marketers might worry that an ad-free premium product actually makes a site's most receptive and responsive audience unavailable to advertisers. Jedynak disagrees. "I don't think that we are carving out the most loyal audience at all." With a fully registered user base, WeatherBug segments its free audience for advertisers just as effectively as it could the paying customers. "Almost all of our buys are targeted buys," he says.More important, having a diversified revenue model actually helped fund more sophisticated ad approaches like WeatherBug's innovative "Select a Sponsor" program, where new users actually pick which ad client appears on their pop-up weather utility for the first week. It all started with a dare from an unwilling client. Jedynak recalls. "He said, ‘I will buy from you if I pay only for the people who say they want to see my ad,' and we took that seriously." The product took five months and more than $100,000 to develop, but he thinks that having reliable subscriber revenue allowed the company the necessary time and resources. "It gave us the revenue stream to develop additional ad solutions," he notes.
The Fair Exchange
The subtlest but most important relationship between fee and free models may be that the steady acceptance of pay-to-play products on the Web also raises the perceived value of all online media and, thus, in turn, the companies that sponsor it. Getting users to appreciate the value and cost of the generally free smorgasbord of information that is the Web has been a tough sell in the medium's first decade. But having an ad-free, paid offering like WeatherBug Pro actually changes the way the non-paying users perceive the free product. "They see that there is true value, and that the sponsor is paying their way," says Jedynak. The proliferation and acceptance of paid content models may be helping all consumers understand that "free media" also requires some fair exchange of value with visitors, namely advertising.Indeed, once users acknowledge the value of online media, they actually seem willing to give a sponsor even more of their undivided attention. To wit — the new hot thing among major media brands and some ad clients is the "sponsored day pass." First seen at Salon.com and invented by California-based Ultramercial, this model lets non-subscribers access the paid areas in exchange for viewing an extended multimedia ad for a single sponsor. "You can't click away from the ad," says Micheal O'Donnell, CEO and president, Salon. "That is our Pavlovian attitude — if you want the food, you have to watch the ad."
And apparently the puppies are staying and salivating. Ultramercials can run up to 30 seconds and include sequenced pages of creative. Nevertheless, according to the company's metrics, 93.5 percent of Salon visitors who initiate the day pass watch the entire ad and spend on average 52 seconds with it, often including interactions with the brand. The format has attracted top-tier clients such as Absolut, Mercedes-Benz, American Express, and even advocacy ads for the ACLU.
Viewer-Initiated Commercials
"It's a fundamental change in the publisher's business model," says Dana Jones, founder and president, Ultramercial, which invented the format. By clearly giving users valued content in exchange for their attention to a sponsor, "we make explicit what has been implicit for decades — the relationship among the three partners in media — viewer, publisher, and advertiser," says Jones. "This is a viewer-initiated commercial that the viewer chooses to watch as payment to gain access to premium content." In this thinking, putting a dollar value on the content makes it possible for advertisers to act more as visible patrons of the viewer's media experience, and so, demand and get more attention.The principle here is much the same as offline, says Jonathan Levin, CEO and founder eMeta, which provides the software for paid areas at NYTimes.com, FT.com, and Hoovers.com. In the real world of print, free publications generally command lower ad fees, while paid and controlled circulation books enjoy the better ad rates. "You need to value your content," he says. "If you don't, no one else will." Oddly enough in Salon's case, the fact that users have the day pass alternative to buying a full subscription to the premium site seems to have helped rather than hindered expansion of the paid base. Salon was relatively stagnant at about 45,000 paying customers when the program started nine months ago, but now has ballooned to nearly 75,000. "For a publication, this is like defying gravity," says Jones.
And because the audience is essentially captive during the spot, the advertiser knows precisely how many people truly sat through their ad, a metric virtually no other medium can promise a client. Ultramercial says it started receiving calls from publishers and ad clients on the day the format first appeared on Salon. It has already pushed Virgin Mobile ads at eMode and IGN.com, and is working in stealth mode with a number of "major media conglomerates" to deploy the day pass at some of the Web's most visible content properties later this year.
A Better Class of Eyeball
While day passing represents a cutting-edge approach that makes the relationship between sponsorship and "free media" clearer to consumers than it is in any other medium, much of the online world continues to suffer a regressive either/or formula to its content business models. Publishers and consumers seem to expect that fee-based content areas should be ad-free, even though magazines and newspapers have been advertising to their paid subscribers for over a century. In part, the unique dynamics of the Web force this Manichean view upon publishers, because their traffic and ad reach plummet so radically when they begin to charge for access. "The experience we have seen on the Web is that, once you put down the walled gate, up to 95 percent of your audience goes away," says O'Donnell. "People flee when they have no choice but to pay."Because of this inevitable user flight at the first glimpse of a sub wall, most publishers have to make a hard choice and do a tough cost/benefit analysis when they move to a paid model. With low-urgency content that is more nice-to-have than must-have, publishers can expect to convert as little as 2 percent of their uniques to paying customers, and virtually gut their advertising reach, says Levin. "There is a trade-off that doesn't exist in print," he says. Accordingly, many publishers start by walling off only a fraction of their content in order to maintain enough raw reach to sell to ad clients.
But keeping ads out of paid areas is not necessarily a long-range plan for content providers, says Zimbalist. "Early on, people were saying ‘free with ads' or ‘pay with no ads,' and I always believed that was a very shortsighted way to market. The either/or model wouldn't be in the best interest of the publishers."
In fact, if advertisers and publishers can change their thinking a bit about online audiences, metrics, and ad effectiveness, they might see that paid subscribers constitute the most receptive and reliable audiences for marketers. One of the oldest and most successful of fee-based publishers, Dow Jones, offers a glimpse of hybrid models to come. Along with FT.com, Janes.com, and SoftwareCEO.com, it is among the only paid sites to place advertising on both sides of the sub wall, at free sites like CareerJournal.com, StartupJournal.com, and OpinionJournal.com, and into the 671,000 paid members at WSJ.com. Dow Jones sells ads across the free/fee network, and doesn't specify WSJ.com as a discrete placement, yet the more highly targeted ad buys generally are going into this area, where the company has much more detailed demo profiles and behavioral data.
"By having the subscription model from the beginning, it's allowed us to command a higher CPM because clearly, people want to know what we know about our user," says Randy Kilgore, VP advertising. Open rates for "run of network" ads go for a CPM of $35.Kilgore's "special sauce" of demographic targeting costs $95 to do tricks like aiming for senior level managers of companies with 100,000 employees, and much of this audience is behind the sub wall. As a result, "we believe we generate a similar amount of advertising revenue as sites that have far greater apparent reach," says Todd Larsen, president, consumer electronics publishing, Dow Jones. The company has also turned around the denser sets of behavioral data that a subscriber base allows into a very hot "Interest-Based Targeting" product. By knowing a user's reading habits, Kilgore and company can sell an auto maker all of the WSJ.com members who recently used the car loan calculator and are therefore, clearly in-market. "We've got a bunch of folks already committed," he says. "It seems to be the topic of every sales call."
A paid model pays off for advertisers in a number of other more subtle ways than sheer targeting. Acknowledging that users are paying their way, WSJ.com is more discriminating in the size, number, and placement of its ads, says Larsen. "But that has turned into a real sales benefit. [Clients] want to be in an environment that is less cluttered."
And a number of others in the industry are arguing now that paying customers simply make better audiences for advertisers. "Subscribers have high loyalty to a content brand," says Zimbalist. An OPA study earlier this year found that familiar ad metrics such as aided brand awareness, message association, and brand favorability ran higher among sites with faithful audiences. "It suggests that content loyalty translates into advertiser effectiveness."
No doubt, publishers will have ample opportunity to prove this case with agencies and clients. According to Levin, eMeta's pipeline of companies that are moving at least some of their material to a subscription model is larger than ever. Nevertheless, in the end, few publishers believe that a subscription business will successfully supplant ad models. O'Donnell expects that the 50 percent of Salon revenue now coming from ads will eventually grow again, and Larsen believes WSJ.com's ad revenues will become much more important to the mix in coming years. Nevertheless, advertisers certainly will be buying into more hybrid networks of fee and free audiences in the near future, which could challenge longstanding conventions about online reach and frequency.
Where the subscription model succeeds, advertisers may also be dealing with a new balance of power. Publishers with a reliable, alternative revenue stream tend to be less desperate and less pliant with clients. In the post-bubble years when many sites were only one lost ad sale away from shutting down, they came to the table with fear in their eyes and a willingness to try just about anything. A healthy subscriber income can change everything, however. "In a candid moment, other site managers and even ad directors would say they have done things they wouldn't have wanted to do," says Kilgore. "We're able to say no."
No. It's been a good three or four years since a media buyer heard that response from a website.
Don't Sell Yourself Short!
By judging campaigns by only one channel, multi-channel marketers may be short selling their efforts.
Direct response and branding budgets will both continue to grow online – it’s crystal clear. Noting the rise of broadband usage, media consumption patterns online, TV fragmentation, and better ad packages, it all leads to the same conclusion.
Online advertising is working brilliantly, pushing marketers to a critical tipping point for media mix allocations.
Currently, most direct marketers view the success of an online campaign by comparing how many dollars flow into their online store versus how many dollars go out into their online advertising campaign. Historical click-through rates, conversion rates, and view-through metrics are all used when deciding where to place the media budget.
However, if the marketer also has brick-and-mortar stores, catalogs, or call centers, it becomes much more difficult to understand the true impact of its online advertising across all sales channels.
If a marketer does have multiple channels and bases its success only by online sales, it is selling its campaign short against its true impact on the total business.
Some refer to traffic to a Website that is not attributable to any online media efforts as “organic” traffic. When online sales come from organic traffic, most marketers are quick to credit their offline promotions or word-of-mouth for creating that customer.
However, any and all sales that take place offline are automatically attributed to offline promotions, period.
Growth in online direct marketing budgets will occur as a result of two things:
1. An increase in consumer confidence and spending online. Looking at many of the research studies that continue to surface and trends with clients, this is already happening.
2. Smart marketers with multiple sales channels will begin to track offline sales behavior to online advertising and Website behavior.
Most studies indicate that between 70% and 90% of all customers for “high consideration” products begin their research online. They may use search engines, the marketer’s Website, or comparison shopping engines to help with their decision.
Ultimately, a consumer may continue that research process into the retailer’s store to see, touch, feel, or try on the merchandise. If that behavior is not tracked, all the clicks and site traffic leading to that purchase is dismissed and considered wasted.
The concept for making this happen is not complicated. Packaged goods and pharmaceutical companies use coupons to track offline sales and prescription patterns to online efforts. Auto manufacturers are using geographical and registration information to link dealer sales back to online advertising efforts. Travel advertisers use special call-in numbers and rewards programs for their online media and Website to track that activity offline.
Notice that these sectors are among the hottest in the industry, and include some of the Internet’s most sophisticated marketers?
Regarding online retailers of clothing, technology and financial services, the correlation between online efforts and offline sales becomes more difficult, but is not impossible. The impact of offline sales by online advertising has been as high as 20% for Avenue A clients in these verticals.
Customer data is the glue that holds the media mix together. To identify customers online, marketers must first serve and track on a cookie level and gather anonymous information about those customers. Offline, marketers can collect data at the point of purchase. Rewards programs and charge cards help to identify customers. At this point, it is a matter of matching the data while maintaining the cookie’s privacy.
This approach requires more analytical sophistication and clear communication across all sales channels. But when that correlation is made, the picture of online advertising becomes more complete. It is a medium that not only drives online sales, but it drives offline sales as well.
There’s no reason to sell short, both from a branding and a direct response standpoint. The online medium enjoys the luxury of being accountable, even in the offline world.
Direct response and branding budgets will both continue to grow online – it’s crystal clear. Noting the rise of broadband usage, media consumption patterns online, TV fragmentation, and better ad packages, it all leads to the same conclusion.
Online advertising is working brilliantly, pushing marketers to a critical tipping point for media mix allocations.
Currently, most direct marketers view the success of an online campaign by comparing how many dollars flow into their online store versus how many dollars go out into their online advertising campaign. Historical click-through rates, conversion rates, and view-through metrics are all used when deciding where to place the media budget.
However, if the marketer also has brick-and-mortar stores, catalogs, or call centers, it becomes much more difficult to understand the true impact of its online advertising across all sales channels.
If a marketer does have multiple channels and bases its success only by online sales, it is selling its campaign short against its true impact on the total business.
Some refer to traffic to a Website that is not attributable to any online media efforts as “organic” traffic. When online sales come from organic traffic, most marketers are quick to credit their offline promotions or word-of-mouth for creating that customer.
However, any and all sales that take place offline are automatically attributed to offline promotions, period.
Growth in online direct marketing budgets will occur as a result of two things:
1. An increase in consumer confidence and spending online. Looking at many of the research studies that continue to surface and trends with clients, this is already happening.
2. Smart marketers with multiple sales channels will begin to track offline sales behavior to online advertising and Website behavior.
Most studies indicate that between 70% and 90% of all customers for “high consideration” products begin their research online. They may use search engines, the marketer’s Website, or comparison shopping engines to help with their decision.
Ultimately, a consumer may continue that research process into the retailer’s store to see, touch, feel, or try on the merchandise. If that behavior is not tracked, all the clicks and site traffic leading to that purchase is dismissed and considered wasted.
The concept for making this happen is not complicated. Packaged goods and pharmaceutical companies use coupons to track offline sales and prescription patterns to online efforts. Auto manufacturers are using geographical and registration information to link dealer sales back to online advertising efforts. Travel advertisers use special call-in numbers and rewards programs for their online media and Website to track that activity offline.
Notice that these sectors are among the hottest in the industry, and include some of the Internet’s most sophisticated marketers?
Regarding online retailers of clothing, technology and financial services, the correlation between online efforts and offline sales becomes more difficult, but is not impossible. The impact of offline sales by online advertising has been as high as 20% for Avenue A clients in these verticals.
Customer data is the glue that holds the media mix together. To identify customers online, marketers must first serve and track on a cookie level and gather anonymous information about those customers. Offline, marketers can collect data at the point of purchase. Rewards programs and charge cards help to identify customers. At this point, it is a matter of matching the data while maintaining the cookie’s privacy.
This approach requires more analytical sophistication and clear communication across all sales channels. But when that correlation is made, the picture of online advertising becomes more complete. It is a medium that not only drives online sales, but it drives offline sales as well.
There’s no reason to sell short, both from a branding and a direct response standpoint. The online medium enjoys the luxury of being accountable, even in the offline world.
Monday
Emergency fixes for blog-clogged Google
It's hard to say what needs patching more urgently, right now: Microsoft Windows or Google. But at least Microsoft makes its fixes conspicuously available. Google's notorious culture of secrecy forbids it from offering even the most innocent explanations.
Fortunately, Register readers have come to the rescue.
On Sunday Google admitted to the Washington Post that it was working on a bug it had found which was withholding thousands of legitimate search results from its users. The bug was in response to another bug: Google's susceptibility to being gamed by spammers who set up 'link farms' to tripwire its PageRank? algorithm. "Is Google starting to show signs of strain against spammers and Web scammers?", asked the Post.
And this week yet another bug seemed to illustrate that the patched-up search engine was losing the battle. Google can't weed out its search results for 'blog noise', such as the millions of empty pages created by Movable Type's "Trackback" feature, we reported.
If you compare Google's search results for OS X Panther discussion with AltaVista's, AltaVista scored a clean sweep - providing a Top Ten free of the Trackback virus that Movable Type webloggers have unwittingly dumped on the Internet. Seven out of the top ten results from Google were duds: empty trackback pages.
In the absence of a bug-report from Google, here are some emergency patches, from Register readers.
"Perhaps the answer is to put -trackback into google whenever you search," writes Paul Fleetwood. "It certainly fixed the example you provided. Though maybe google need to make it a default setting."
Stuart Bell agrees.
"Perhaps Google should consider such an innocuous fix? Granted, we'll end up in yet another arms race between the blogger software folks and Google filters, but that's life out on the wild and wooly Internet frontier, eh?"
Paul Tomblin offers the more sophisticated filter -mt-tb.cgi - which seems to do the trick nicely.
"I suppose the simplest way to do this would be putting a new section in the Google preferences page - a noise filter, spam filter, blog filter, whatever - which has either hard-coded or user editable exclusions for searches," Andrew Hodgkinson. "To be much use for the 'average casual searcher' who doesn't know about preferences, advanced search or blogs, it probably ought to be switched on by default - a little risky (as with any spam filter it might block legitimate content), but surely no more so than SafeSearch."
Indeed so.
Perhaps with its executives fixated on an IPO, and aggressively expanding the company's advertising franchise, Google has forgotten that it once had a search engine too, way back when. Perhaps the executives would like to attend to it now. ®
Fortunately, Register readers have come to the rescue.
On Sunday Google admitted to the Washington Post that it was working on a bug it had found which was withholding thousands of legitimate search results from its users. The bug was in response to another bug: Google's susceptibility to being gamed by spammers who set up 'link farms' to tripwire its PageRank? algorithm. "Is Google starting to show signs of strain against spammers and Web scammers?", asked the Post.
And this week yet another bug seemed to illustrate that the patched-up search engine was losing the battle. Google can't weed out its search results for 'blog noise', such as the millions of empty pages created by Movable Type's "Trackback" feature, we reported.
If you compare Google's search results for OS X Panther discussion with AltaVista's, AltaVista scored a clean sweep - providing a Top Ten free of the Trackback virus that Movable Type webloggers have unwittingly dumped on the Internet. Seven out of the top ten results from Google were duds: empty trackback pages.
In the absence of a bug-report from Google, here are some emergency patches, from Register readers.
"Perhaps the answer is to put -trackback into google whenever you search," writes Paul Fleetwood. "It certainly fixed the example you provided. Though maybe google need to make it a default setting."
Stuart Bell agrees.
"Perhaps Google should consider such an innocuous fix? Granted, we'll end up in yet another arms race between the blogger software folks and Google filters, but that's life out on the wild and wooly Internet frontier, eh?"
Paul Tomblin offers the more sophisticated filter -mt-tb.cgi - which seems to do the trick nicely.
"I suppose the simplest way to do this would be putting a new section in the Google preferences page - a noise filter, spam filter, blog filter, whatever - which has either hard-coded or user editable exclusions for searches," Andrew Hodgkinson. "To be much use for the 'average casual searcher' who doesn't know about preferences, advanced search or blogs, it probably ought to be switched on by default - a little risky (as with any spam filter it might block legitimate content), but surely no more so than SafeSearch."
Indeed so.
Perhaps with its executives fixated on an IPO, and aggressively expanding the company's advertising franchise, Google has forgotten that it once had a search engine too, way back when. Perhaps the executives would like to attend to it now. ®
