2004 Ad Spend: Search Is Hot, But Contextual Pollution Of Figures Continues

Online ad spending figures for all of 2004 were recently released by the IAB. What do they show specifically for search? Up, up, up, no matter how you want to slice it, though mixing in spending on contextual ads doesn't give a completely clear figure.

  • Search & Contextual Is Top Category, Again: For another year, search (which includes contextual ads, according to the study) had a far bigger slice of ad spend than any other category, gaining a 40 percent share of all revenue. Display ads were a distant second at 19 percent, though if you buy into the "All Display Advertising" super-category the IAB also provides, then it rises to 39 percent of all spend.
  • Search & Contextual Worth Nearly $4 Billion: In terms of actual revenue, search was estimated to have earned $3.85 billion in ad spending.
  • Search & Contextual Had Biggest Spending Rise: Search revenues rose more in dollar amounts than any other category, climbing by $1.3 billion from $2.54 billion in 2003 to the aforementioned $3.85 billion in 2004. That's a 51 percent rise.
  • Search & Contexual Still Below Other Offline Spending: Despite being worth $4 billion, the report shows that search spending is still well below many other types of media spending. Direct mail tops the list, being worth $50 billion, followed by newspapers at $46 billion and broadcast TV at $33.5 billion. The list ends with outdoor advertising at $6 billion. But with more growth, search may push ahead.

The Chart View

The IAB Internet Advertising Revenue Report is available (PDF format) to anyone and has plenty of charts and details. Another nice chart is over in the press release about the report. I used those figures to sort the data differently, which you'll find below:

Type

2004 Revenue

2004 Revenue Share

$ Change From 2003

% Change From 2003

Search

$3,850

40%

$1,307

51%

Display

$1,829

19%

$303

20%

Classifieds

$1,733

18%

$498

40%

Rich Media

$963

10%

$236

32%

Sponsorship

$770

8%

$43

6%

Slotting Fees

$193

2%

-$25

-11%

Referrals

$193

2%

$120

164%

Email

$96

1%

-$122

-56%

Total

$9,626

100%

$2,360

32%

The IAB also created a super-category called "All Display" to lump together spending on display advertising, sponsorship, slotting feeds and rich media. I've shown that on the chart below, along with search, classfied and an Other category that combines referrals and email.

Type

2004 Revenue

2004 Revenue Share

$ Change From 2003

% Change From 2003

Search

$3,850

40%

$1,307

51%

Display (All)

$3,755

39%

$557

17%

Classifieds

$1,733

18%

$498

40%

Other

$289

3%

-$2

-1%

Failure To Break Out Contextual

A giant flaw in the report is the classification of contextual ads as search. It's absurd -- simply absurd -- that this was done.

I know, I parrot on and on that "Contextual Is Not Search, Contextual Is Not Search." But throw Polly another cracker, because I'm going to come full circle and make the point again.

Google Throws Hat Into The Contextual Advertising Ring is my article on Google starting its contextual ads back in 2003, where I talked about the difference between a viewer being in "search mode" versus "browse mode" and the impact that might have on advertising:

Advertisers have traditionally bought paid listings at search engines with the expectation that these listings will appear before people in "search mode." That is, only those actively searching for information will see these ads, after they perform a specific query. Anecdotally, consumers in search mode have converted extremely well. It makes sense. They wanted something, and the paid listings promised to fulfill exactly what they wanted.

Contextual ads are different creatures. Some consumers seeing them may be in search mode, such as when they read an article about a particular topic, then see a paid listing that seems to offer an answer to that topic. However, others may be in "browse mode," where they check out a paid listing more out of curiosity rather than to fulfill a particular desire. Will browsers convert as well as searchers?

In short, a search ad to me is related to someone somehow, someway having done an ACTUAL SEARCH. If there's not a search involved, then it doesn't qualify as a SEARCH ad in my book.

Where's The Search In Contextual?

In contextual placement, no search was done to target the ad. The ad is targeted based on the context of the page. That's why they're called CONTEXTual Ads. Just because they are sold by companies that also sell search ads doesn't make them any more searchy. Heck, some contextual ads are placed in emails. By rights, that makes them email advertisements more than contextual ads.

Since Google's rollout, we've had plenty of evidence that contextual ads do convert, just not as well as search. There does seem to be a difference between the attitudes and reactions of those seeing contextual versus search ads. Given this, you'd expect advertisers might want to do things differently with contextual ads, such as perhaps showing images rather than text or buying them under a different pricing model.

Image & CPM Pricing

Images? Yes -- and when Google began allowing images for contextual placement last year, that should have been the nail in the coffin of any idea that contextual was the same as search. After all, you didn't see Google shove image ads up in response to keyword searches on Google itself.

Search ads don't necessarily have to be textual, of course. We have a long history of keyword-targeted banners, for example. But when Google began putting images on pages, any holdouts still believing that contextual = search should have gotten the picture that that equation doesn't work.

Well, what about pricing? If these ads are so different from search, why are they sold at Google on a cost-per-click basis like search ads? Actually, people were already asking if that should change soon after they rolled out.

Now we have CPM pricing from Google, fresh in last week. It was yet another red flag that contextual isn't search but instead much more akin to display ads, especially when images are involved.

Information Week finally gets the point. Google Tests Non-Search-Related Ads is the headline from it about about the recent Google move. Nothing changed really other than the pricing model, but suddenly, these are "non-search" ads being sold.

Here's the New York Times talking about Google's new "display" program. Again, the only "new" thing is that the pricing model has changed. That will probably make it much more attractive to those doing other types of display advertising. However, with image ads, they already had the ability to do display advertising via Google for nearly a year.

So tell me again how contextual ads are search? Because a lot of them are sold by a search company, Google? Google's not a search company. It's an ad company, as the New York Times article gets into, as this recent ClickZ article discusses and as I wrote about back in 2003:

Note that Overture is on the BusinessWeek "Info Tech 100" list. Overture's more an ad company than a tech company, and so is Google, in many ways. Technology is vital to what both companies do, but the products they have are much more related to media and advertising than technology.

Parroting Onward

Still need more? Here are some fairly recent articles where I've explored the issue:

Expect that I'll keep parroting the "contextual isn't search" line whenever required, such as when a major report like this on "search" spend does mixing that shouldn't happen.

In addition, the IAB seems to have no problem breaking apart various aspects of display advertising into these subcategories and reporting figures for each of them:

  • Display Advertising

  • Sponsorship

  • Slotting Fees

  • Rich Media

Meanwhile, search -- the big breadwinner of online advertising that took so long to finally win any respect -- still gets one single lump-sum figure and no breakouts despite the IAB itself explaining in its report that search includes:

  • Paid Listings
  • Contextual Search
  • Paid Inclusion
  • Site Optimization

Let's hope in 2005 that future reports provide figures for each category and that contextual finally gets recognized as a non-search product. I don't think contextual is a bad ad product. I don't hate contextual. It's just that contextual is not search, so it should be treated independently.