The Online Advertising Market - Research Paper Example

?Online Advertising Market Online Advertising market has grown around the two key modalities: search and display advertising. Online advertising first came into being in 1994when a web magazine called Hot Wire sold an ad banner to AOL which was displayed on its web page (Kaye & Medoff, 2001). The basis of compensation calculation for Hot Wire, through the ad, was much like a traditional media: it was the number of individuals who viewed the ad. This methodology subsequently developed into Cost per Mille (CPM) which is the industry jargon for cost of advertisement for every thousand views. In 1996, Procter and Gamble executed a deal with Yahoo! in which the basis of revenue calculation was number of clicks on the advertisement instead of number of views which was the norm of the day (Google and Yahoo news, 1996). This basis of compensation was quickly picked up by the media contemporaries since it provided a more focussed approach similar to the ones employed for direct response of the prospect through mail and telephone solicitations. It came to be known as CPC or Cost per Click method of online advertisement compensation. Inspite of its rapid popularity, CPM still remains the basis of many advertisements placements, particularly in the display ads segment. Online advertising revenue has steadily increased its share in the advertising industry both in absolute and percentage terms. For example, in US alone, the online advertising industry has grown from 3.2% in 2000 to 8.8% of total advertising, and from 8.1 billion in 2000 to 21.7 billion in 2007 (data derived from Interactive Advertising Bureau Press Releases 2000-2007). From connecting computers in government offices, internet has come a long way since 1994 when it was opened for public for the first time. Internet users figure has jumped from 0.4 % of the world population in 1995 to 29.9% in 2010 (IWS, 2011). According to Coffman and Odlyzko, internet traffic almost doubled every four months in 1995- 96. The growth after that has been doubling on a yearly basis since then till 2001 (Coffman & M.Odlyzko, 2001). Main reasons for such drastic growth of internet are the ease of access and usability of internet, huge inventory of data and excellent connectivity instantly. Internet growth is a phenomenon which has not only changed the way individuals work but has also deeply impacted the culture and commerce of countries. The advent of social networking and entertainment in internet arena has further increased the scope of internet users. Before comparing print and online advertisement, it is imperative to focus on the relationship between content and advertisements published through the two mediums. In print media, the ad is essentially locked with the content i.e. the ad is visible only for that particular day’s content. However, in internet medium, even if the content changes, the ad would still be there. This means that the chances of showcasing an old ad in print media exist only in retrieval of archives. However, the ads in internet are always current, unless it’s the reproduction of archived prints. The relationship or the non-existence of relationship between content and ads has encouraged several journals to open their archives for free which results in increased traffic to the website, thereby increasing its ad revenues (Kohler, 2006). This has changed the way print media looks at ads on its digital editions. Major differences that exist between print media advertising and online advertising are in terms of geographic reach, demographic targeting and ongoing revenues. While the ads in print media have limited geographic reach, online advertising is virtually everywhere. Also, print media ads have limited capacity to customize themselves based on geographic targets than online media. For example, it is nearly impossible for a newspaper to serve a different edition for every city of the world while it is very much possible to serve online ads based on the user’s location. Also, online ads can be updated irrespective of the content, as they are stored separately, which gives them the edge of always being fresh. Customization to the native language of the user enables the online media to target based on language specifics which might not be possible in print media unless the newspaper/ magazine runs an edition in the targeted language. The most important difference lies in the fact that online advertisements create ongoing revenues while print ads create revenue only for the relevant period of time. Online advertising offers promotion solutions at a fraction of operating charges of print media. Though the reach and connectivity factors remain the same in both online and print media, it’s the continuous change in digital media, its growing influence that is leading the transition from print to digital. New platforms such as social media, web 3.0 and the semantic web enables to make the digital advertising sharper and more accurate. Expansion of internet gave rise to search engines which placed relevant ads along with search results. The first search based ad was placed in 1995 with Infoseek, one of the earliest search engines. However, earlier the ads were sold on CPM basis. This led to the contradiction in the philosophy of search engines i.e. speedy guidance to the user’s search as they were charging the advertisers for the retention of attention of users on their web page. This motivated the search engines to switch to CPC model. Advertising on search engine web pages essentially works on the basis of search key words entered by the user. Since the ads pertain to the product or service searched by the user, the probability of user clicking on the ad is higher, thus making this methodology the web version of one to one approach. However, the mode of promoting through ads remained largely the same as ads in traditional media; they were web version of static advertising in print media (although video and adobe acrobat ads started gaining attention). Rise of search engines as advertising platform is majorly due to its uniqueness to target key search word/phrases. In 2000, Google launched Adwords. However, it was not until the dot.com burst in 2004 that the online advertising market consolidated itself by the exit of small and weaker players and emergence of stronger ones. Dot.com burst gave rise to web2.0 market where Google has a major share. It currently stands as the number one player among search engines. The name Google is derived from Googolplex which means the number 1which is followed by hundred zeroes. The name signifies the amount of data available on the net. Initially, Google was like any other search engine using the page ranking algorithm which ranked the results in order of their relevancy. In order to make profit, it had to seek advertisements although it was clear that it will not entertain any pop-ups or banners on its site (so as to maintain its image as focussed and minimum time consuming search engine). The solution was text like ads which are placed in the left margin of the page and which correspond directly to the search and location of the user. Rise of Google as search engine can be attributed to several reasons, the first of course, being quality. Quality in a search engine refers to the relevancy of the results yielded to the keyword searched. This quality can be attributed to the edification of Google’s search algorithm which it guards like a treasured secret. Innovativeness of Google has been another reason for its popularity. Google created a catalogue search tool and Froogle, its product search service, which fine tuned its reach in shopping related searches. It introduced a news search engine, along with social networking site Orkut. It has segmented the search by images and location as well thus making search hardly a matter of few clicks. The algorithm used by Google is revised continually which gives it an aura of ever-evolving specie, much like humans. Google is the largest earner by selling ads without being obtrusive, something which is no short of an achievement considering the hard selling tactics employed by marketers these days. Apart from the positives of Google, other factors which have contributed in its growth pertain to general change in perception and reach of internet. People are becoming more and more adapt at technology and use their past experience to key in the best search words. Large inventory of documents, researches, advices and easy access to all of them has changed the way students carry out their researches, travellers plan their journeys and mothers decide what’s best for their infants. It has empowered the people with information and Google acts like a catalyst in filtering and sending this information to the user. Internet is no longer a scare for financial transactions, albeit online frauds still exist. Personal Data Collection is a controversial subject for Google. As per Google, it “does add a cookie to a user's computer when he/she clicks on an ad, this cookie expires in 30 days, and Google does not associate a user's search activity with his/her ad click history” (Google, 2011). However, Google imparts advertising cookies (double click) which track user’s motility on the web. This feature enables Google to track the user on any web page which has double click or adsense cookies even though the page might not be Google’s property. Its implication is that millions of web pages which do not belong to Google unintentionally aid Google in tracking individuals targeted by Google. Certain other personal data collection techniques which Google uses have been objected by rights activists the world over. One of these personal data collection techniques is called Click Tracking. Through Click Tracking, Google creates a log of its user’s navigational activities/ clicks including ads, banners etc. in all of its services. Also, through Forms, Google collects the exact date, time and location of the user, although these entries are hidden. Although the user enters only the user name and password in Google, user’s referrer data is used and sent after clicking ‘submit’ button which enables Google to locate the user’s place. Google also uses Server requests which are stored in the log files to track the IP address of the requesting computer, date, time & time zone of the request made, language in which the request was made, the search query, browser and operating system of the user. Google is able to retrieve huge amount of significant information about the user’s surfing habits/ tendency (such as location, browser type, browser version, OS, etc.) by embedding small java scripts in its websites throughout the web which are automatically executed by the user’s browser, thus, imparting the information. Similarly, it uses web beacons which are 1pixel by 1pixel transparent.gifs which are embedded in most of its check out screens. Since they are transparent the user never comes to know of its automatic download and the information it sends to the Google. It’s interesting to note how Google uses its mammoth data repository to market its ad. Firstly, ads displayed by Google are influenced by the search made by the user in the most recent past which might be just few minutes back. This gives it an edge over its competitors like Yahoo which use days-old data to display ads in a bid of behavioural targeting. Google makes maximum use of search queries for the ad targeting. Also, it displays only those ads which cater to the geographic location of the IP address from which the user is browsing. Thus, even a vague query like ‘washing machine’ would throw up the ads of the firms which sell washing machine in the same geography. Google typically retains its search data records for over a year. An individual who uses a number of Google services such as AdWords, Analytics, Blogger or Personalized Search- unknowingly consolidates his entire profile, activates, summary and navigation detail under a single unique e-mail id which is his Gmail address. This empowers Google to keep haunting the individual with the most appropriate ads even without the use of hard sales proposition. Such records of personal data have raised several ethical issues and have been seriously objected by privacy advocates. A case in light is that of NebuAd which pulled down the shutters on its business of displaying ads based on behavioural marketing. Major issue in the working of NebuAd was the methodology it adopted to collect the user information which was seen as breach of trust and privacy infringement. It was argued that by tying up with Internet Service Providers (ISPs), NebuAd had the access to crucial data such as key search terms, page views and ad clicks, time spent- site wise , zip code, browser info and connection speed which enabled the company to classify its user's interests and execute behavioral targeting. The cause of concern was that there was no way how a user could opt out even though they never voluntarily opted into the system. Growing ethical issues and concerns forced Nebu Ad to dissolve the company in February 2010. NebuAd is a striking example of how lack of ethical answerability can doom a company. Inspite of innumerable objections and privacy concerns, online advertising is growing manifolds and evolving continuously. Major reasons for the growth of online advertising is the competitive advantage it offers over traditional media in terms of unlimited geographic reach and ability to use interactive media. Online advertising started with banner ads which were flashed on the website and a click on it would lead straight to the sponsor’s site. It is worth noting that often the banner ads just rely on the popularity of the ads sites instead of narrowing down their approach to target a focussed audience. Thus, banner ads work more like web version of outdoor advertising; the neon signs are put up at the busiest crossing irrespective how many prospects cross that part of the city. Interactive advertising brought effectiveness to the web advertising by using the dynamics of web. Usage of java script in advertisements allowed the sound, animation, video to be played in the ad, supposedly making it more interactive. This sort of advertising attempts to utilise the broadcasting qualities of the internet and clubbing it with the traditional print advertising model. Television-Like Ads are another form of online advertising which run television like spot commercials. An example of this sort of advertising can be found at the website of is Berkley systems which is into multimedia entertainment software. As a mode of advertisement, it combines audio and video and presents full screen ads much like television commercials. Online advertising has also branched out to Intrusive form of advertising which interrupt the user’s activity and drives them to compulsorily watch the advertisement before they can proceed with their request. This sort of advertising overcomes the issue of consumer rejection at the on start, although it might be irritating. Push advertising or Narrowcasting is the most popular sort of online advertising methods. This sort of advertising method is known for adjusting its content as per the user’s profile and not as per existing content of the website. In short, it finds the user before the user finds it. An example in point is Point Cast’s Push tool. Point Cast provides free software to the end user which would fulfil multiple information requirements such as news and events. Point Cast earns its revenue through advertising sales which are sold as 30 second slots running on the screen saver for a month. Point Cast sends ads directly to the user’s PC instead waiting for the user to discover and explore the ad. Though the process of ad placement by Point Cast is based on behavioural targeting, it avoids the self –selection option with the user and displays the ad as part of its service. Different models of online advertising that have evolved over a period of time. Most successful of these models are E-mail Advertising, Behavioural Targeting, Affiliate Advertising, Semantic Advertising, Audience Targeting and Branding. E-mail advertising is built on pay per view model whereby the ads are attached to the email service. The publishers of online advertisements provide the value added service of email and the advertisements are pushed to the users of the email service while they are browsing their mails. Since the ads are clubbed with a valuable service like e-mail, the ads reach directly to the user going around the self – selection stumbling block. Behavioural Targeting is based on the browsing history/interests of the users. The ads displayed on the user’s screen reflect the user’s online behaviour in the past. Due to heavy pressure regarding infringement of privacy of the users, now the users have been enabled to opt out of this sort of advertising if desired. Affiliate advertising refers to the promotion practise whereby the sponsor rewards the publisher for bringing visitor/viewer to its advertisement through the merchandising efforts of the affiliates. In this model, the publisher may be rewarded with cash or gifts or referrals. This model is executed by four core players: The promoter/seller, the network, the publisher (affiliate), and the customer. This model has evolved to include a secondary layer of players such as affiliate management agencies, super-affiliates and third party vendors. More often than not, the method of advertising is quite regular search engines (both paid and organic) and display ads. Some marketers even publish product/ service review which lends credibility to the ads. Affiliate marketing in which the traffic of one website is diverted to another is not as popular as website syndication, it nevertheless plays important role in the online marketing strategy of merchants Semantic Advertising attempts to understand what the web page is trying to communicate to the user and place the advertisement based on its fit with the web page. Semantic, as implied, executes semantic technologies to analyze and understand the online content, and then filtering out the most appropriate content for that type of info. Obviously, it relies on the fundamental understanding, that user is browsing a particular webpage because he has a need for some information contained in the page. The science of figuring out the information and then filling the website with accurate ads is called Semantic advertising. Semantic advertising, like behavioural targeting, agrees that user has some sort of interest in the web content browsed by him. However, techniques adopted to collect data for behavioural targeting have been under fire due to privacy invasion and related issues. This problem has been done away with semantic advertising since it relies on the content of the web page rather than the user’s profile to target the ads. On the flip side, the success of this sort of advertising is limited to the success of web page in attracting search engine crawlers to itself. Semantic Advertising goes beyond contextual advertising. Contextual advertising relies on the key words which might have multiple meanings and which may not be differentiated by the automated functions. For example, the word Kingfisher, in contextual advertising may display ads for both zoo and liquor. The non-relationship between the two advertised commodities points out that at least one has wasted the ad spends. Thus Semantic advertising apparently does a better job if the user has figured out what he wants. Audience targeting is another online advertising model. Sponsors have found networks play particularly useful role in forking out clearly targeted audience which buys in substantial volume, along with providing highly innovative advertising solutions. There is a perceptible shift from buying sites to buying audiences. The advertisers are consolidating their presence on net to few networks with which they can work in a concentrated manner, as real partnerships, to increase their reach and yield from advertising spends. Appearance on networks like Facebook makes a statement for its users since the target audience is an environment which is more than buying and selling. Branding, as a form of online advertisement, is fast gaining momentum and has proved to be a symbiotic relationship between the parties involved. Site branding and Co-branding are other benchmarks in online advertising. Site branding refers to the collaboration between the web publisher and the sponsor whereby, the publisher agrees to display the advertisement as part of the content of the website. This may be done by creating a website/webpage within the main website , the content of which is created and developed by the representatives of both the web publisher and sponsor. Co-branding is an even more intimate version of site branding whereby both the companies act as publisher and promoter jointly and agree for joint promotion. The ad-revenue is also jointly shared on a pre-determined basis. Bibliography Coffman, K. G., & M.Odlyzko, A. (2001). Growth of the Internet. AT& T Labs- Research , 4. Google and Yahoo news. (1996, May 8). Yahoo and Procter & Gamble Develop Interactive Traffic Building Promotion. Retrieved April 24, 2011, from Yahoo!: docs.yahoo.com/docs/pr/release19.html - Cached Google. (2011). FAQs. Retrieved April 24, 2011, from Adwords: http://adwords.google.com/support/aw/bin/answer.py?hl=en&answer=6350 IWS. (2011, April 5). World Internet Users and Population Stats. Retrieved April 24, 2011, from Internet World States: http://www.internetworldstats.com/stats.htm Kaye, B. K., & Medoff, N. J. (2001). Just A Click Away: Adertising on the Internet. Massachussets: Allyn and Bacon. Kohler, E. (2006, April 16). Differences between online and print advertising. Retrieved April 25, 2011, from Technology Evangelists: http://www.technologyevangelist.com/2006/04/differences_between.html Read More