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Why We're Not Seeing More Online Ad Revenue -- Part I

Posted on Wednesday, May 05, 2010 at 3:30 PM

It comes down to this: online ads just aren't working for too many advertisers.

By William Dunkerley

How many times have you heard that advertising money is migrating to online? According to Advertising Age, during 2009, print and broadcast advertising was down, but Internet advertising was up. J.P. Morgan is forecasting more growth in online advertising for this year.

According to Bill Keller, executive editor of the New York Times, "...Web audience is growing at a great clip, while print circulation is not. And online revenues are growing faster, too, albeit from a smaller base. If the trend continues, there's little doubt that -- eventually -- online becomes the main business."

At the same time, other publishing executives are throwing up their hands on online ad revenue, and looking for ways to monetize their content. Media mogul Rupert Murdoch has been especially outspoken in his belief that future prosperity for publishing will be dependent upon selling content, not ads. "The old business model based on advertising-only is dead," he resolutely proclaimed. Murdoch seems to believe that his new pay-as-you-read model will lead to salvation of the industry.

So there you have it. The future is in online ad revenue. But, then, it's not.

Who's Making Money Online?

Perhaps the most relevant question is how many fellow publishers have told you that they're making enough money from online advertising to support their operations and produce a good profit? I'm talking about money on the bottom line, not hype, expectations, or blind hope.

One answer comes from Hearst Magazines president Cathie Black. She's said that "...digital advertising revenue is still pennies on the dollar." For many publishers it seems hard to get a good price for online ads.

But think about it. If advertisers were making good money from their online ads, wouldn't they be willing to pay good money to advertise? What's wrong here?

Advertising That Bears No Fruit

Advertising Age for January 27, 2010, ran the headline, "Why Most Digital Ads Still Fail to Work." The story goes on to list seven mistakes found in today's digital ads. They include excessive complexity, ambiguity, and meaningless use of techno bells and whistles. A PEW study of online users found that "79 percent say they never or hardly ever click on advertisements." In February, Bokardo, a social media design blog, published a piece on "Why Social Ads Don't Work." The gist of it is summed up in one line that asserts it's "because people are being social, not searching for something."

The idea that online ads aren't working isn't new. Back in 2003, BBC News carried a story, "Why Online Ads Do Not Work." It quotes technology analyst Bill Thompson saying, "...when I am online, looking for information, reading the news, or simply surfing around aimlessly, the ads are in the way and I block them out."

The story told by these articles is basically that most online users don't want to see ads, they try to ignore them, but even if they took to time to read them, they'd find them confusing, intrusive, not pertinent, and pointless.

Contrast that reaction with the experience of print ad consumers. For many print readers, the ads are a desired part of the publication. For the newspaper reader, that may mean seeing ads trumpeting sales at the supermarket or the car dealership. For the specialized magazine reader, it may be ads announcing new products or just showing what's available. Some print readers even report in surveys that they read a magazine from back to font because they want to see the ads first!

But if ads can have such intrinsic value to readers, why should they lose that value online?

There's More to the Story

The business function of any advertising-driven publication, print or online, is to connect buyers and sellers. How well that is done has been the dividing line for some time between many successful and unsuccessful print publications. The same rule applies to online. However, many of the online content providers may not be operating with this concept in mind.

The fundamental strategy here is that the publication's content is used to attract readers who in turn will be attracted by the advertisements. The readers need to have a propensity and proclivity to buy.

If an online publication seeks to attract readers just to build traffic statistics, it is not fulfilling its responsibility to the advertisers. You can't blame the publication entirely, though. Advertisers clamor for more and more metrics that are by nature quantitative, not qualitative. And that's what the advertisers get: quantity, not quality. That can result in an audience made up largely of non-buyers. Regardless of whoever is to blame, this is one reason why online ads don't work. And in the end, it is both the advertiser and publisher who suffer as a result of this malfunction of strategy.

Another factor is that much online advertising ignores some of the basic principles that have been known to make advertising successful. They've been identified through extensive research with print advertising. What are they? They are color, size, and repeat exposure. They create effectiveness for an advertisement. Many online ads make ample use of color. There's no disadvantage there (except that some of the color usage may lack aesthetic appeal).

The idea that a banner ad, small as it is, can be effective, however, evades good sense based upon proven advertising practice. Indeed, effectiveness is proportionate to size.

Then there's the matter of repeat exposure. On one hand you might think that online has it all over print in this respect. Who doesn't have a recollection of seeing certain online ads over and over again, almost endlessly? Many of those ads are dynamically served on a rotating basis. That certainly offers new possibilities for targeting.

But consider this comparison: A print publication reader may see an ad as he or she reads through the publication. Moments, hours, or days later, if the reader wishes to return to that ad, it is a relatively easy task. And when the reader does, it is very valuable repeat exposure. For the advertiser, it is a repeat shot at a reader whose interest in the ad is active. Repeat exposure to consumers who lack that motivation and interest is certainly worth far less. Even worse, it can annoy and irritate the reader. What about the online ad that a reader wants to return to? Have you ever tried to return to an ad that was dynamically served? It can be an impossible quest. An ad without a specific spatial location in the publication has a serious disadvantage when it comes to a reader seeking a repeat exposure.

The Story Gets Worse

These are some of the reasons why online advertising isn't working out of deficiencies in the ads themselves -- and why publishers are failing to see the kind of ad revenue they're looking for. In addition, though, there are other qualities that are present in online advertising that are actually off-putting to consumers. In Part II, we'll describe them, along with the dark shadow that they cast across the whole online ad industry and its development. And, finally, we'll offer recommendations for concrete steps you can take to improve your online ad revenues.

William Dunkerley is principal of William Dunkerley Publishing Consultants, www.publishinghelp.com/consultant.

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