What if you worked for a company that had a successful product, one with good offline exposure but with none online, and were recently handed the responsibility of marketing it online? As a consumer, you have seen ads when reading your favorite news sites, after performing searches at a search engine, when checking email from your free, web based email account, and of course in the body of emails themselves. As part of the learning process you started to subscribe to certain industry related newsletters from the IAB, Barbi Francisco, eMarketer, and this one among others, all of which have helped to confirm your company’s desire to enter the online arena. In an attempt to begin the process of adverting online, you found yourself as one of the 8300 that registered for the largest conference on digital marketing ever, Ad:Tech New York 2005. And, there is a chance that you were one of the 150 or so that attended a session entitled, “A Crash Course in the Digital Marketing Vendor Landscape” that Cliff Kurtzman, Rocket Scientist and pioneer of cyberspace, and I gave. For those that did not attend, this article is for you.
Our “Crash Course” was based off a talk by a similar name given for the first time during Ad:Tech Chicago of this year. The presentation is at its heart a framework for by which those interested but not familiar with the online advertising arena can begin to understand the roles that particular companies play and whether such a company might make for a good place to spend money. The talk, and this article, focus on the various sectors of digital marketing, and a) the business models that comprise each sector, b) some of the major companies operating in each, c) the types of advertiser best suited for each; and, d) the level of experience needed to leverage the particular sector. As this is a crash course, it tries to be broad enough to act as a map for understanding
digital marketing yet thorough enough to be useful. And, while it is based on an existing presentation, like any document that tries to map an industry, the landmasses of our space have shifted, even in as little time has passed between the original speech and this one, just as the continents have over time. We cover the sectors in order of experience needed, saving the companies that support your advertising efforts for the end. The first sector we cover is among the largest and well known, search engines and search networks. Search networks are a combination of a search engine and other sites where a particular ad will show. For example a paid search ad on Google will also show up on the results pages of AOL. The engines and the networks make their money by displaying keyword targeted advertisements on earning money each time a user clicks on the ad. Advertisers choose exactly which words on which they might appear. Search engines and search networks work for all levels of advertisers. They offer the most granular targeting options and are the choice of local and national advertisers – from those who spend $50 per month to those who spend more than $5 million. The best known companies in this space are Google, Yahoo, MSN, About, Miva, and Kanoodle. Danny Sullivan’s Search Engine Watch <http://www.searchenginewatch.com/> offers years of learning and information specific to the search engine industry and companies in it.
The next category shares several things in common with the search engines and search networks, not the least of which is the overlap in companies who operate in it. This category goes by the name contextual advertising. Similar to search, advertisers in this space show keyword targeted ads on a cost per click basis. The major difference between
this sector and the search engines is where the ads show. With respect to engines, the keyword targeted ad shows after a user has performed a search query on a web site. With contextual advertising, ads are shown not on the results pages of various search engines but on content web sites, usually on the side of the page or other areas where ads show. Rather than the user type in the particular keyword search, companies in this space have special technology that scans the content of the page and determines a set of keywords that match the content. These companies then show text ads that correspond to the keywords they determined matched the content.
An example of contextual advertising in action is as follows. A user might be reading about an article dealing with taxi cabs in New York City. The user might then see the ad from our limousine company in New York City on the side. Several of the major search engines, such as Google and Yahoo offer contextual advertising in addition to traditional advertising on search pages. Advertisers should look carefully, as by default their campaigns will show on contextual placements as well. Other companies, such as Tacoda, Revenue Science, and Industry Brains offer contextual only opportunities, that is to say they do not run a search engine. We recommend new advertisers try these after feeling comfortable with search advertising, and give it an experience rating medium through high.
Next up in the digital marketing landscape comes affiliate advertising using affiliate networks. What makes affiliate networks an attractive choice is that unlike the major search engines, contextual solutions, and display ad networks (which we cover later) with affiliate networks, advertisers pay on a pure performance metric such as cost per lead, cost per sale, or percentage of sale. Advertisers do not pay on a cost per click or cost per impression basis. The true affiliate network is
primarily a technology solutions provider and marketplace creator that offers a turn key solution for websites to work directly with individual websites looking to promote offers of their choice. With affiliate networks, the advertiser doesn’t have to build technology for tracking the performance of each affiliate, nor do they have to worry about payment to multiple parties. As part of the solution, affiliate networks handle the tracking and payment, the advertiser paying only one check to the network who then disburses individual payments based on the site’s individual performance.
Using the limousine service example again, an affiliate might have a site about travel that has a section on New York City, and as a member of an affiliate network like Commission Junction and Linkshare, would look through those companies offers and might decide to run the ad from the New York City limousine service. Likewise, they might end up on the limousine site and notice an “affiliates” link, which would then lead them too the marketplace. In general, affiliate networks offer a great choice for a large variety of advertisers. As opposed to search engines and contextual advertising, those who leverage affiliate networks are not actively bidding on specific terms; they are joining a place where websites looking for offers to promote go. On the whole, affiliate networks work better for advertisers whose offer works for a rather large geographical region and/or somewhat broad demographic set. The limousine service might be too narrowly focused to see much return from the affiliate network. In other words, just because you build it (affiliate network integration), doesn’t mean they (the sales) will come.
Graphical advertising, or display ads, make up another major area of online advertising. Yahoo alone generates 25 billion ad impressions (an impression being defined as an ad loading on the page). Combine Yahoo,
AOL, and MSN, let alone the thousands of other smaller, but still popular websites, and you can see how this form of advertising would account for up to 50% of all internet advertising dollars. Managing advertising spends across a large number of sites takes a lot of resources, and even if you have such resources, there still exists an incredible amount of impressions that you most likely did not capture. The sheer number of sites and volume of combined impressions they generate opens the door for businesses such as the display ad networks. These companies focus on aggregating sites together so that an advertiser can through them reach hundreds of sites. Display ad networks make their money by taking keeping some percentage of the ad dollars paid to them that they show on the websites they aggregate, which they call publishers.
Among the most complex parts of understanding the display ad network business are the seemingly subtle differences among the various companies that operate in this sector. Going through each company would take too much time, unfortunately, but we can provide a description of the basic factors that set each apart. The first factor is the company’s size, or reach, i.e. how many unique users does the network effectively see. A recent report from comScore Media Metrics, an agency that tracks among other things effective reach, shows just how large display ad networks can become. Of the top 15 companies with respect to total reach, display networks comprise almost half, including positions one, four, eight, and nine. The top company in this arena sees almost 80% of the U.S. internet population in one month.
Besides reach, the individual sites that make up the network are another factor. Different sites have different types of traffic. It’s worth asking on order to see if the sites come from well-known names, niche sites, and/or the online equivalent to Cinemax. How the networks can
target the traffic makes up the third differentiating factor. In other words, does the network offer advertisers the ability to pick specific sites to run on, a channel / vertical based approach, or simply run of network (no real targeting). Targeting by country along with options for showing the ad only on specific times and days has become standard across the major networks. Fourth is the payment metric for showing their advertisement. Advertisers that want specificity in targeting – specific sites, channels, etc., will find themselves paying on an impression basis, whereas several networks offer pure performance (cost per action, for example) options, but the trade off tends to be less specific targeting options. Display ad networks work best for advertisers whose product reaches a wide audience and ones that have significant online advertising experience. Brand advertisers and those with a performance goal (a certain cost per signup) have used display ad networks quite effectively, as evidenced by the proliferation of LowerMyBills and Classmates ads.
Speaking of LowerMyBills, they fall into a particular category of vendors, one that makes up our next sector, lead generation. LowerMyBills does not have their own product per se; their business helps other companies receive consumers. One of those other companies is Ameriquest, a mortgage bank. Ameriquest does advertise themselves, sponsoring NASCAR and even the Super Bowl half time show, but ultimately what drives their business are new mortgage banking customers. They don’t necessarily need to be the ones creating and showing the ads on the internet. They are just as happy if a company like LowerMyBills does this and simply sends them the information on the new customer. The lead generation companies assume the media risk – creating the ads, tracking their performance, and managing the site – all while charging on a per
lead basis. They don’t charge for the services related to acquiring it.
Lead generation does not work for every type of advertiser. The companies that employ it now are those in financial services (e.g. mortgage), post-secondary education, automotive, some types of travel, and certain home services. Lasik eye surgery and cosmetic surgery are two areas where lead generation is starting to be used more. Companies interested in lead generation should meet certain criteria if they are to be successful. First, the value of the customer should be high (a customer in each of the types of businesses above is worth several hundred if not several thousand dollars to the companies). Second, there should be a high demand for the product, i.e. many people need it. Third, the offer should not have geographical constraints, such as being available only in a limited number of cities, and lastly, the product should have continuous demand. With automotive for example, there are always people looking to buy new cars, just as there is a year-round need for people to buy a house. Most importantly, from an operational perspective, each of the companies that currently operates in the lead generation space has put into place mechanisms for accepting in-bound leads and transmitting them to sales representatives who work on turning these leads into customers. The lead itself isn’t worth money to the advertiser, which highlights the importance of a process that can convert some of the leads into sales.
In the future, we will see two things with respect to lead generation. The customer value threshold will drop, i.e. companies with a lower target value per client will be able to use lead generation more, and second will be a greater diversity of types of companies that use it. Many types of companies meet the criteria above but have not considered putting into place the necessary mechanisms for taking a lead and
turning into a customer. LowerMyBills, Quinstreet, Degrees.com, and Low.com are examples of companies offering lead generation expertise. And, customers that use them tend to be good candidates for the next segment. The next segment is technically a subset of lead generation, but acts differently enough to warrant its own category, one called co-registration. Like lead generation it too collects new customers for companies without the companies having to buy traffic and manage their own website, and similarly, we recommend that it be used only by experienced marketers.
Co-registration differs from lead generation in its implementation and user experience. Companies using co-registration piggyback off of other companies’ sign-up process. Take for example a site like MarketWatch. When a user signs up for their free account, they are given the opportunity to opt-in to other offers, such as a trial subscription for the Wall Street Journal. The same is true for users who join CoolSavings, Eversave, iWon, and Yahoo. They will see a variety of offers during the signup process. These vendors are used by a variety of advertisers including major brands and even local companies. It can be a source for high volume traffic, but it is also a type of traffic that requires careful monitoring. Different types of sites will product different results; marketers need to have the ability to track the performance of their campaigns by placement as a site like MarketWatch will send over different people than a site where people go to enter a contest. As a result, all pricing should differ between them. Co-registration is a powerful tool, but a form that still carries some negative connotations from 2001 when it was abused by a subset of marketers who used the method to sign up users to a variety of ad-only email lists. AzoogleAds, Adteractive, and Aptimus are three companies in addition to the ones mentioned within that have areas of their business specializing in co-registration.
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