It is All About the Ads Now
Jay is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Actually, it’s been always about the ads as far as media companies are concerned. Only that now ads have become more of a financial imperative for today’s Internet media properties. Advertisers have long been in the company of the old media of TVs and newspapers, and without the support of today’s marketers, online media outlets would have to take up something else to maintain their Web presence. While the analog advertising on TV and in print has had its lasting effect, how to make the advertising model work again in the digital format remains a challenge.
Online Media companies, also Google (NASDAQ: GOOG) and Microsoft (NASDAQ: MSFT), most known for their search-ad technology, are increasingly focusing on improving the working mechanism of online display ads, a primary form of online advertising. There are also a host of third-party display-ad software developers such as AppNexus, MediaMath and AdRoll that all compete to provide digital display-ad solutions to both media companies and marketers.
Advertisers spend tens of billions of dollars on Internet display ads each year without really knowing how targeted their ads are and having the tools to measure their advertising effectiveness. Going forward, display-ad targeting and measurement may well be the two issues that will either make it or break it for ad-supported online media companies. General Motors' recent withdraw of its ad displays from Facebook (NASDAQ: FB) may have really underscored such concerns. Building on the sheer size of its user base, Facebook now leads in the display-ad market, followed by Google, Yahoo (NASDAQ: YHOO) and Microsoft. But the competition with Facebook has only been intensifying. Google, Yahoo and Microsoft each have direct control of an Internet advertising specialist, DoubleClick, Interclick and AQuantive respectively, a move aimed to improve the level of their ad-display services.
It seems that investors are demanding the same things as marketers. Why wouldn’t they if the companies they invest in rely solely on ad dollars for revenue? To address that, Facebook is implementing a real-time bidding mechanism for its display ads to help better serve advertisers. The technique allows advertisers to bid for an ad spot based on a signed-in user’s Web browsing history. For now it’s only a testing idea, I guess, until it can actually increase the click-through rate. No one can guarantee that a person’s browsing history can actually make up an accurate reference to his current frame of mind. You would think that someone might just click on something sometimes. But when asked, people all say they’ve never clicked on anything. What does this lead to for marketers? Very poor return on ad spending.
So ideally, how should a targeted display ad work? One day I was posting a message on a relationship site, having a discussion with someone about reading Shakespeare’s work and watching the plays. As I was typing in the related phrases, an ad banner popped up displaying the logo of a local Shakespeare theater production company with its current show advertised. A coincidence or an on-target display? Regardless, I clicked right through because that was something I considered useful right then in real time. Well-targeted ad displays do a good service to both marketers and site users. Someone is going to figure out a way of showing what potential consumers are really looking for in real time.
A well-placed ad may still not quite hit the intended target and thus, measurements on user response are needed to help provide necessary feedback to marketers. Google has devised a technique that advertisers can use to see if 50 percent or more of an ad display has stayed on a viewing page for at least one second. As inconsequential as such a measurement may seem to be, it alludes to the possibility that anything can be measured in an interactive, digital environment. Microsoft has also been trying to improve its display-ad software, Atlas, which is used by both digital ad agencies and marketers to place ads on Websites and measure the performance of their ad campaigns. Smaller ad-service companies playing the display-ad market may have the potential to change the game because they offer dedicated ad-display solutions, sometimes a springboard for breakthroughs. According to Bloomberg News, AppNexus, one of the budding display-ad software developers has reported a profit and may plan for an IPO soon.
Randomly lining up a site’s perimeter with indistinguishable and static ad displays is increasingly becoming a concern for all parties involved, the company, site users, marketers and investors. If ads are to be the holy grail for online media establishments, companies have got to find a way to make it work, or else their long-term survivability is called into question, so are the future returns for investors who back the companies.
JJtheArdent has no positions in the stocks mentioned above. The Motley Fool owns shares of Facebook, Google, and Microsoft. Motley Fool newsletter services recommend Google, Microsoft, and Yahoo!. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.