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Tuesday, May 27, 2008 

Web-Advertising is sooooo broken....

Danah Boyd had a great discussion going on her Zephoria Blog in late 2007, called: "Who clicks on ads? And what might this mean?" There's some really worthwhile information there, starting with some quotes from Dave Morgan (AOL Global Advertising Strategy)

"99% of web-users don't click on ads... and only a tiny % of those actually purchase!"

But wait... it gets worse!

"Ninety-nine percent of Web users do not click on ads on a monthly basis. Of the 1% that do, most only click once a month. Less than two tenths of one percent click more often. That tiny percentage makes up the vast majority of banner ad clicks. ~ Who are these "heavy clickers"? They are predominantly female, indexing at a rate almost double the male population. They are older. They are predominantly Midwesterners, with some concentrations in Mid-Atlantic States and in New England. What kinds of content do they like to view when they are on the Web? Not surprisingly, they look at sweepstakes far more than any other kind of content. Yes, these are the same people that tend to open direct mail and love to talk to telemarketers."

That's actually pretty revealing data, especially the rough demographic profile of the clickers themselves. This may go some way to explaining the proliferation of those really annoying gambling pop-up ads and flashing, vibrating banners proclaiming to (what would surely be) a seemingly implausibly gullible web-user who by some incredible stroke of luck, has just won a really neat prize! ~ Regrettably, market forces don't lie... it seems these ads are apparently targeted at the only people who dependably click.

As is often the case, the blog's commentariate kick in with some worthwhile observations:

"There is another aspect to the question of "who is clicking on these ads" that I don't believe has been raised. That is, if the ads are taken as indicative of "level of interest in the population at large", then the people who are clicking on those ads are the ones who are driving marketing decisions for the world at large."

and KEVIN: "...Its the marketer that gets hurt - HE/She advertised to the wrong person. The clicker did not buy anything- (do we know if they convert?) It means that ads in the web world are worth even less than we thought. It means that Google's revenue and business model is a huge scam?"

[my note: even Google’s Adwords average only around a 2% CTR, and Google consultant Professor Hal Varian has stated that less than 2% of ads might get clicks and less than 2% of clicks might convert to sales, meaning that 0.04% of clicks might result in sales... ~ A $40B web-ad market might sound impressive, but according to Sir Martin Sorrell, of WPP, the wider Advertising market is a Trillion $ market; so with such dubious current ROI, that $40B might really currently be largely driven by hype, and the pressure to be 'a player']

But my favorite comment comes from CASEY:

"I actually work for a company that does a lot of online advertising campaigns, so I think I can shed some light this. The honest-to-god truth is that the people in charge of these campaigns have absolutely no idea what they're talking about. They describe their target audiences with phrases like, "Interested Non-Users," or by using terms they've made up, such as the gag-worthy "prosumer."
[SUBSTANTIAL EDIT] "...Of course, the punchline to all of this is the fact that most click-throughs don't translate to actual sales. If an ad campaign is relying on accidental click-throughs, or on attracting the attention of a niche market who can't afford what they're selling, then the joke is on the person footing the bill. The model is clearly broken, and most people in the industry know that, but the people signing the checks aren't in on the joke."

This all indicates a kind of grand-illusion based on volume metrics: i.e. If total number of clicks is counted in millions, even a tiny percentage will bring some users sales. However, It’s the same logic as Spam and ‘Cold-Calling’ i.e. If you call 100 people and only get one buyer, it’s a sale, but you really annoy the other 99.

A post on: mini-news.com, entitled "Bye Bye Ads" quotes Usability expert Jakob Nielsen: "The most prominent result from the new eyetracking studies is not actually new. We simply confirmed for the umpteenth time that banner blindness is real. Users almost never look at anything that looks like an advertisement, whether or not it's actually an ad."

These are Clayton Christensen's 'Non-Consumers'... 'Non-Consumers' of web advertising.

i think micro-subscriptions is one of the things that will evolve. plus a whole lot of people earning less money, which is not a bad thing

what is your take on the online advertising future?

I think solving the current situation is not going to be either quick or easy, but it is necessary. ~ My take on the future? Its actually an area that we are working in, so it is of keen interest to me. - I am convinced that to achieve significant change, you have to change the whole paradigm, and that means not accepting any of the current systems and processes as mandatory. Its all up for grabs... and as Bill Bernbach said: "The future belongs to the brave".

yes, to changing the paradigm, and it is happening anyway.

with the advent of new media, no one needs advertising anymore to learn about what is going on, or what is useful and good. the people who still need advertising are industry professionals and producers of sub-standard products.

i understand this from looking at the way personal awareness functions ... when we are selling ourselves, our mind is agitated, and when intuition is functioning, our mind is quiet ... the former i equate with the advertising industry, the latter with word of mouth

the hope for the advertising industry is to become exquisitely subtle to the point of invisibility, and the hardest thing will be changing the central mindset, from getting, to giving.

energy follows intention, motivations are clear for all to see now in the plugged in world, manipulation will be increasingly difficult to pull off. advertising might have to actually become a service industry, not for the traditional clients, but for the end user

my two rupees worth

thanks for your time, enjoy, gregory lent

Greg, I can understand your sentiments and agree to a certain extent. However, 'Advertising' has been stigmatized in the eyes of many people because of the previous and existing paradigm. But, as Doc Searls et al pointed out in the Clue-Train-Manifesto... It should/could be a 'conversation' between demand and supply. ~ It does need to change, and necessity is the mother of invention.

again, thanks for your time

i think there is a space for user-created ads, reverse the normal flow, but accomplish the same thing.

we now look through a window at a message, designed in a flow from company via agency to consumer .... imagine that same window, only the flow is reversed, from user to company, via social media ... i bet it will be much stronger and much cheaper

an expanded use of social media perhaps

(thanks for your time, no need to reply, though am on twitter at gregorylent)

an example in the direction i am seeing ...


Sorry, this is going to sound too off-the cuff to be very helpful I'm afraid, as I don't want to dig up a bunch of sources, but I just have to say that the whole premise of this post is terribly mistaken.

You seem to claim that there can't possibly be anything meaningful happening with online advertising, using some pretty reasonable numbers ($40B market, 2% clickthru, 2% conversions) to somehow come to the misguided conclusion that it's a failed industry.

There are thousands of successful companies with millions of happy customers because of this new marketplace for search advertising. Just do a simple search for something like "outdoor hammock" or "custom tshirt" to find lots of companies who have grown very successfully, mostly off of paid search advertising (after a few years of optimization they now show up high in the natural results, too, but I can tell you from experience that wasn't always the case).

You end by implying that, since most people don't click on the ads, ever, the entire system must be broken. A lot of people do click on the ads, and they're not all women looking to just waste time online. Online, paid-search model businesses have all kinds of demographics in their customer base. The system has worked quite well for those consumers and for the businesses. I don't understand what's broken about it.

Thanks for the generally solid posts though! Keep up the good work!

Hi Blake, thanks for your comments...

You say: “...the whole premise of this post is terribly mistaken” and that I have: “...somehow come to the misguided conclusion that it's a failed industry.”

The Industry hasn’t failed, its doing OK… but take away Google’s revenues and the industry's overall growth has been more or less flat since 2002. Have a look at the following link to get a perspective on what’s really happening. – In short, Google is kicking goals but most of the big companies like P&G still only spend 2% of their advertising spend on the web, and you have to ask: Why?

You also say: “...There are thousands of successful companies with millions of happy customers because of this new marketplace for search advertising"

OK.. let’s be clear, that “Marketplace” basically belongs to Google… and the “thousands of successful companies” to which you refer are probably the clients in Google’s double-sided-market duopoly. (adsense and adwords) Yes, Google is doing really well, despite its average 2% CTR. (more than twice as good as anyone else’s CTR).

You also say that: “…after a few years of optimization they now show up high in the natural results” and, (I’m paraphrasing you): “…I don't understand what's broken about it.”

Google, and its search-ranking system has been corrupted by SEO (a Google search generally finds the best SEO’d sites, not the best sites) Please refer to the ‘Direct Traffic’ survey last year, which showed that in the UK, (Google’s most successful territory). “…Fewer than one in four premier UK firms appear on the first page of Google UK when their primary keywords are entered”. and “The company conducted a search according to the field in which the FTSE 100 firms describe themselves as industry leaders, and found their web presence to be sorely lacking. For example, running a Google search on the term "fashion" brought back no mentions of Marks & Spencer in the first 100 results, despite the fact that the high street retailer is a market leader in this field.”

Google has claimed such large market-share because it applied a whole-of-web logic to its service and thereby became the vertically-integrated search and advertising Leviathan it is today. However… if I could summarize the key element that I think is “broken”.. Its that even Google’s business is locked into the same Web-Paradigm where advertisers and publishers are in quasi-partnership in an entrenched system where customers are either identified based on the web-site content of the publisher (which is extrapolated to make assumptions about web-site visitors), or in the case of Adwords, where ‘keywords’ (which signify units of user-interest) are auctioned to Google’s own publishers.

i.e. the paradigm is still Advertiser-to-Publisher… and where is the consumer in that paradigm? Switching off... that's why it's broken.

Thanks for the response, Simon. I've seen some very successful companies built mainly through paid search advertising, so I when I hear disparaging remarks about adwords, I have a tendency to jump into my occasionally-donned Google Fanboy suit and defend it. =)

I do agree with most of your statements as they apply to secondary search engines, and especially to content advertising. But it seems like you're still skirting the fact that Adwords on Google itself -- and by that I specifically mean paid search advertising that appears mainly alongside google.com search results, not in publisher content -- has proven immensely successful. The fact that Google has come to dominate the marketplaces for search advertising doesn't take anything away from the effectiveness of the model, both for advertisers and for users. Google just reworked the paid search marketplace idea from overture and made it everything it could be, and it's taken years for yahoo and microsoft to finally get around to cloning every aspect of Adwords.

I understand the complaint that "Google, and its search-ranking system has been corrupted by SEO (a Google search generally finds the best SEO’d sites, not the best sites)." But it doesn't seem to me that a report finding that a search for "fashion" in the UK doesn't bring up the retailer Marks & Spencer is solid evidence of it. I doubt most web searchers who type in the word "fashion" are really asking Google to direct them to a fashionable boutique, but I think a survey would be in order, asking people what they were actually hoping to find with that search term, before declaring that the system is broken.

I agree that the content-targeted/ contextual advertising business doesn't seem to really be coming through with much to show for all the effort and money that's been thrown at it by countless companies over the last decade. It seems like that's the component you're saying is really broken: "Its that even Google’s business is locked into the same Web-Paradigm where advertisers and publishers are in quasi-partnership in an entrenched system where customers are either identified based on the web-site content of the publisher (which is extrapolated to make assumptions about web-site visitors), or in the case of Adwords, where ‘keywords’ (which signify units of user-interest) are auctioned to Google’s own publishers." I'm not quite sure I follow that last bit about Adwords.

I agree that display and contextual advertising, for the most part, is proving pretty ineffective and a negative presence on the web so far. And I also think the natural results, even on google.com, still have a long way to go before they meet my expectations most of the time. But I think google is always working on ways of improving that, and paid search advertising alongside google searches and whatever else evolves to be similarly effective, whether on your desktop or on your mobile browser, will continue to be a positive way for many consumers to find providers, and an effective way for many advertisers to reach high-potential customers.

Blake, sorry its taken me a while to answer; I've been busy. - Its fairly easy to laud the achievements of Google and to say that the current overall system is fine, and customers are happy. - Judgement of 'success', like 'beauty' is in the eyes of the beholder... I think web-advertising, and even Google's version, is ripe for disruption. I've considered the current landscape in depth, and I am not so smitten as you. I think there is a potential revolution waiting in the wings... As to how it all plays out? Time will tell.

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