In
their traditional forms, most media in this country get a majority
of their revenue from advertising, which generates roughly $150 billion
a year. Newspapers generate more than $50 billion of that, and television,
more than $40 billion.
Of the
total, online advertising accounts for roughly 6% or 7% of U.S. media
ad revenue -- a roughly estimated $7.3 billion in 2003 and $9.6 billion
in 2004.
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Online
ads fall into a few broad categories:
Display
ads, mostly in the form of banner ads. These
are the ones that appear at the top or along the sides
of many media sites; the category also includes pop-ups
and pop-unders.
Display
ads, for a long time the most common sorts of
online ads, are declining
in popularity. The main reason is that their "clickthrough"
rate is abyssmal -- currently somewhere in the neighborhood
of 0.25%. This means (if my math is correct) that
only one
in every
400
people
who see an ad actually click on it.
We still see lots of them, though, mostly because
they are very cheap to produce. One source I found
said they can cost as little as 20 cents per 1,000
times they are displayed. (Like all advertising,
online ads are priced by "CPM," or cost per thousand
impressions.) |
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Classified
ads are bread-and-butter for newspapers, as well as
for many newspaper-affiliated Web sites. Overall, they
account for roughly 17% of all online ad revenue.
But
classified ad revenue for media sites is threatened
by online-only competitors, including e-Bay, monster.com and such free sites as craigslist.org.
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However,
the largest revenue generators, according to the State
of the News Media 2005 report, are search ads.
These
come closer to taking advantage of the advertising
potential of the online medium. They show users an
ad based on what the user has requested, either on
a search engine site such as google.com (which
has been a pioneer in
this area and offers several related search
ad
services) or
through the search function of a news site.
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Rich
media ads are the
multimedia ones. They are increasingly popular as more
users access the Internet through broadband technologies
that
can accommodate the Flash animation, movement around the
page, sound, video and other attention-grabbing (and annoying)
methods that these ads
use.
They currently account for a relatively small amount
of online ad revenue (the report you read puts them at
under 10%), but they are growing fast. The clickthrough
rate on these ads is about five times higher than for
ads that simply sit still, according to DoubleClick. |
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There
is a truly vast amount of information available about online
advertising. I recommend the Internet
Advertising Bureau as a good (albeit biased in favor of marketers)
site, as well as clickz.com (ditto).
AdAge (the
magazine) also has great info, though much of it is for subscribers.
But here is a summary of some key points:
Online
advertising is becoming more popular though it still is generating
only a small fraction of the revenue of traditional media ads.
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Online
ads generally are evaluated -- and, importantly, priced -- based
not on how many people see them, as in traditional media, but
rather on how many people click on them.
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So
the online advertising world offers another example of the active
audience we talked about in the context of online news:
What matters most is not the passive viewing of an ad, as in
the newspaper or on television. What matters is what the user
does
with that ad.
Search
ads -- rapidly growing in popularity and in revenue generation
-- are another example. They work only because an audience member
does something, such as request information of a particular nature. |
The
Internet offers the ultimate in niche advertising, boiling the
targeted audience down from a large number (for traditional mass
media) or even a small number (for niche media, such as some
cable channels or special-interest magazines) to, ultimately,
a single individual with unique interests.
No
other medium offers advertisers the ability to deliver a message
to an audience of one -- to one person guaranteed to be at least
temporarily interested in that message.
This
is the ultimate in targeted advertising. |
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