The Digital Lookout

Yahoo have disclosed their Q3 revenues and they aren’t good, a measly 1% increase on the same period last year and down $20 million on Q2.  The announcement comes hand in hand with them announcing they would be cutting 10% of their workforce to improve cost efficiencies.  This is no great shock in the current economic client but it is the breakdown of revenues which shows the most interesting facts.

Paid Search and performance based display advertising, such as Right Media and their Yahoo Direct Programme, were actually up a much greater percentage than the overall picture with the drop in revenues coming from “premium display advertising”, i.e. the CPM based placements across the Yahoo portal.  This ties in with what I have spoken about before regarding the future of digital media buying being a more flexible, reduced cost environment with many more placements being bought on an auction model or at the very least on a CPC basis.

There are two main causes for me believing this is the way digital display advertising needs to go:

1. The Global Economic Climate: advertisers cant afford to be paying premium CPM rates in the name of “brand building” when the economic climate is so fragile.  The next 12 months for advertisers, both on and offline, is about making sure a return is gained on advertising spend, and £20+ CPM, is never going to bring about a direct return no matter who you are.

2. Advertisers are Getting More Savvy: being from a paid search background and working for a results driven agency, when I spent some time media buying I was astounded at the stunts that some publishers tried to pull with their CPM’s.  Just because it is a high traffic or niche area of the site does not mean that anybody is paying anymore attention to the ad on that page than they are on the less popular pages.  An ad is an ad and 99% of Internet users can spot them a  mile off.  Thankfully more and more companies and media buyers are now beginning to think this way too and not buying the expensive slots thus meaning prices fall.  The old model of media buying also doesn’t play to the strengths of online, they make no sense.  So I am advertising online, where I can review performance real time, change ads real time, but your telling me I have to book for a minimum one month period no matter how it performs? It just doesn’t add up.  Publishers need to start operating in the online world rather than the offline media buying world.

So even more evidence from Yahoo that traditional media buying online is on its way out, but who can be the first to capitalise from it with an effective flexible ad platform?

Mediapost has reported that online display advertising rates have hit the lowest point this year in the US with the average display ad page generating just 27 cents CPM in Q3 of 2008.  This is no great surprise if you follow the trends in the market or work in this arena, but the article’s commenter seems a little less certain of the cause;

“It’s not surprising that it’s been trending down, but what is surprising is the size of the drop,” says Rajeev Goel, president and co-founder of PubMatic. “What we don’t know yet is whether the trend is due to increasing capacity on the supply side, or to the fact that the economic malaise is beginning to find its way into the online ad industry.”

Well, Im pretty sure I can tell you what has caused it.  Firstly advertisers are tightening their belts, no risks are being taken in such an uncertain time.  And secondly, they are channelling their ad spend into channels with a better return, like paid search and natural search engine optimisation.  A recession is no time for elaborate brand awareness campaigns, it si a time for keeping things tight, keeping profitability solid and riding the storm.  There is a time and a place for online display advertising but unfortunately for publishers, now isn’t it.

The net affect of this is with less advertisers booking space, and those that do driving a hard bargain, publishers are forced to take what they can get, and sell of the remnant inventory cheap.  There will still be exceptions to the rule, but not too many, and most advertisers will be driving a hard bargain for anything they do buy.  Good news for the media buyers (if your clients still have a budget that is!) but not so good for the publishers.

The launch of Myspace’s new ad scheme myAds into Beta last week opened up the social network as an advertising option for businesses of all sizes.  With a 4 step, simple campaign set up there is no doubt this is aimed at small businesses with little or no experience of online advertising.  And with the super low minimum commitment of £25 they have reduced all barriers to entry for small businesses.  No doubting that this is an attempt to follow in Facebook’s footsteps in attracting direct advertisers and allowing self service and flexibility on ad campaigns (its the future, remember?) but is Myspace in a position to make a go of it in the same way Facebook has?

It certainly has the audience for it, with nearly double the unique user figures of Facebook there is an audience there to be tapped into, but impressions are what the modern day advertiser is after.  It is also most certainly not what the small business advertiser is after, I know from experience that if a small business is investing £100, then they sure as hell want £200 back.  They do not have large marketing budgets and they don’t give a hoot about brand building, they want a return on investment.  And I’m not convinced Myspace can give it.

For a start on Myspace there is less browsing involved.  On Facebook you are looking at news feeds, checking out updated status’ and searching for groups, and this is the time when you are most likely to be tempted to click and ad.  With Myspace there is less of these type of actions involved, at least there is how I use it.  And you are generally there to view a particular persons profile or catch up with a contact, and when you have a purpose, you are less likely to be tempted to click an ad, no matter how well targeted.

Also, the garish nature of Myspace profiles means that it will take something special for an ad to look right on the page, this will make users opposed to the ads and less likely to accept them as useful.

I suppose the idea of the ads, much like Facebook’s similar programme, is to utilise the profile information to target your audience effectively and I buy into this, use all the information you can to show the right ad, to the right person, at the right time.  I’m just not sure Myspace has the layout and the typical user actions to support such a programme.  And certainly my experiences with Google Placement ads on Myspace haven’t shown me anything to suggest otherwise.

Google has announced on the Inside Adwords blog the launch of a display advert creation tool in the US and Canada in an obvious attempt to broaden its market for display advertisers and in the hope of expanding its share in this area.  The availability of ads for the use in display and placement campaigns is often a barrier to entry for the smaller companies as a full professional creative suite can cost thousands of pounds.  By providing this tool they will be hoping to broaden the reach of their placement network and steel some market share from the big publisher sites such as Yahoo!, AOL and MSN.

The tool looks remarkably easy to use in the video demonstration, as you would expect, as it works on a simple standard template with upload functionality for a logo, selling point and call to action.  The background css is fully editable to create the appropriate colour scheme and the tool creates ads in four standard sizes.  This is a smart move from Google and they have followed the simple model of Adwords which will appeal to the less savvy SME market.

It is only available in the US and Canada at the moment but once proven successful a UK launch is inevitable as Google aims to try and win the battle to become more than just a search engine and more of an advertising platform.

An investigation has been launched by the IAB and the IASH into the misplacement of display ads within the ad exchange community.  The investigation comes after the Yahoo! owned exchange Right Media was implicated for ad misplacement and NMA spotted ads for brands such as T-Mobile and easyCar on the explosivefightvideos.com and also large blue-chip companies such as ING direct and Orange advertising alongside pornographic content.

Right Media have responded by saying, “When content is inadvertently miscategorised by a member of the exchange, we help our members communicate to correct the situation. We have rigorous standards and guidelines for our members.”  But critics are calling for all display advertising exchanges to become IASH compliant to ensure ad misplacement does not occur.

This instance and the examples listed clearly show the dangers of using ad exchanges and blind networks as part of your media plan.  Although the promise of cheap impressions and large volumes can be tempting, the reality can often be misplaced adverts and ads appearing in inappropriate locations.  If you are going to use these channels, then make sure they are controlled and regulated and don’t be tempted by the cheapest, run of site options, at least make it channel specific so you can have some idea of where you are going to be appearing.